The property market is always one of the most reactive sectors to the general state of the economy. .
Over the last couple of years there have been many factors that have led us to the current state of the property market. So, to kick off my new blog series I thought I would share some of the thoughts I have had about where we are in the second half of 2022.
The stamp duty holiday was introduced in July 2020, then extended until 30 June 2021, to help homebuyers, and to boost the UK property market during the COVID-19 Pandemic. It meant that buyers completing a purchase on a property for less than £500,000 before 1 July 2021 didn’t have to pay stamp duty.
The housing market.
Generally the housing market proved more resistant to the downturn caused by the Pandemic than most other sectors of the economy. The Government support was aimed at bringing new buyers into the housing market. However, as soon as the holiday began, everybody went buying and the most basic concept in economics took effect as demand outstripped supply and prices rose.
First time buyers faced other obstacles to house buying at this time, with lenders reluctant to consider those on furlough or with small deposits, but the outcome of the stamp duty holiday was a nightmare for the housing market and achieved the reverse of the Government’s intention by pricing first time buyers out of the market.
So what’s happening now?
A lot of Estate Agents I’m speaking to now tell me there are houses sticking on the market and that the market as we enter the second half of 2022 has in fact plateaued, and I have seen this happening over the last few months.
This effect is now supported by the Office of National Statistics “UK monthly property transactions commentary”. In June 22, residential transactions fell by nearly 8% compared to May. One of the reasons for the slowdown is that during the rush to buy caused by the stamp duty holiday Estate Agents chanced their luck by inflating the price confident that a buyer would appear. Now that the market is slowing those houses are overpriced and not selling as easily as they did when the market was being fuelled by excessive demand.
The overheated market during 2020 and 2021 is highlighted by another figure from the UK monthly property transactions commentary. Residential Transactions for June 2022 are 54% lower than those for June 2021, the last month of the Stamp Duty holiday. Residential property prices rose by 8% in a year, with some areas seeing increases of more than 20%. The rush to complete before the end of the Stamp Duty Holiday undoubtedly pushed prices higher.
What about the rest of 2022?
According to a recent Which report “the trade body Propertymark reported its members had an average of 22 properties for sale per branch in May, compared to 50 in a normal year”. With pressures on the cost-of-living house price growth having plateaued may now start to fall slightly. In its latest market commentary, Rightmove says that this could be caused by a combination of affordability constraints and more properties coming on to the market.
Of course this commentary was before the new Prime Minister took up office. Liz Truss faces an economic emergency, unprecedented during peacetime. For someone who campaigned for “No more handouts”, there is already talk of a £100bn pubic fund to attack the current issues facing the UK economy. One things for sure, in my view, the further the economic struggles go the more likely we are to see houses sticking on the market and vendors willing to take offers again.
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