May UK Property Market Roundup
The SevenCapital Property Market Roundup is all the headlines you need to know about the property market over the last month, brought together in one handy place. For May 2021, we discuss the continued success of the Stamp Duty holiday, the fastest growing economy in 70 years and Savills’ 2.1% rise in property prices. Plus, what does the 3% rise in UK rents mean for the Buy-to-Let market?
Stamp Duty Holiday Sees 22% Growth in Property Transactions
The Stamp Duty holiday has long been the backbone of the property market’s growth, and with the extension well underway, property transactions have increased by 22%. Since the tax break was implemented in July 2020, an average of 103,724 residential property transactions have been completed each month.
To put this into context, the 12 months leading up to March 2020 saw an average of 84,691 transactions, before the first national lockdown halted the market. While this is the second Stamp Duty holiday the UK has endured, the current tax exemption has been much more effective at sustaining the market.
In light of the 2008/09 financial crisis, the government temporarily waived Stamp Duty Land Tax on property purchases, which led to an average of 60,048 transactions per month. Although this exemption supported the market, monthly transactions still dropped 27% during this period.
Leading to a 2% drop in property prices during 2008-09, the previous performance of the Stamp Duty holiday emphasises the success of the current tax benefits.
Andy Sommerville, director at Search Acumen, said: “This analysis suggests the property market has been far more responsive to intervention compared to the post-financial crisis holiday. The housing market’s strong performance, compared to the wider economy, highlights the contrast between the current healthcare crisis and its economic impacts, and the 2008/09 crisis was rooted in financial markets.”
Savills Reports 2.1% Rise in House Prices
Since adjusting their 2021 market outlook from 0% property price growth, Savills has reported a 2.1% rise in prices in April alone. With the Stamp Duty holiday continuing to propel the market, this rise has been the strongest month-on-month increase since February 2004.
As well as highlighting the monthly increases we have seen so far this year, this rise has also brought annual house price growth to 7.1%. However, as the summer months maintain this momentum, Savills is expecting house price growth to reach double digits in the coming months.
This upward trajectory is being maintained by a combination of factors, all of which are driving the demand for property. Constrained supply is a significant contributor, with instructions to sell over the past 12 months now 5% lower than the amount of sales agreed.
Marking a post-Global Financial Crisis record, the 180,000 completed transactions we saw in March paved the way for one of the strongest performances throughout April to date. The number of sales agreed in the month were 55% above the 2017-18 average, although this was slightly below the 73% we saw in February.
Download the 2021 UK Investment Guide
In the 2021 UK Property Investment Guide you will find:
- Current market performance
- Forecasts for the UK property market in 2021
- Updates on UK currency
- What will life look like after Coronavirus
- How will UK property deal with the Brexit transition
UK Economy Expected to Grow at Fastest Rate Since 1940
Throughout April, forecasts for a pre-Covid economy by mid-2022 flooded multiple news outlets, but as the UK continues on a roadmap out of lockdown, this economic recovery is expected sooner rather than later. With lockdown restrictions set to end next month, the Bank of England has suggested that the economy will grow at its fastest rate in 70 years.
What was once a bleak outlook with minimal growth, the economic forecast for 2021 comprises a 7.25% increase and a more positive perspective on unemployment levels. While this growth won’t make up for the 9.9% contraction – the biggest in 300 years – that we saw last year, it will begin to compensate for these struggles.
With considerable losses to recover from, this anticipated growth is best perceived as an economic recovery, as opposed to a rebound, according to the governor of the Bank of England. Nonetheless, this recovery will be enough to bring the economy back to pre-Covid levels.
While government incentives, including furlough schemes and the Stamp Duty holiday, are a driving force behind this economic recovery, the re-opening of society and consumer spending, will also be significant contributors. As a result, we could see the return to a 2019 economy by the end of the year.
UK Rents Rise by 3%
Not only has the UK sales market been thriving over the past year, but this unprecedented demand has also been translated throughout the rental market. While we have seen some regions become more popular than others, the prospects for the remainder of the year are increasingly bright.
After tenant priorities shifted throughout 2020, we have seen three distinct rental markets emerge: London, the wider commuter zones and major city centres. With an undeniable London exodus, the demand for property outside of the capital has seen average rents increase 3% on the previous year.
Although the London rental market continues to lag behind, falls in the average rents have subsided. What stood at -10% falls in the year to February 2021, rents are now 9.4% lower in comparison to March 2020.
However, following month-on-month growth, the demand for rental property (excluding London) remains in an upward trajectory. In April 2021, demand was 59% higher than a typical, pre-Covid month between 2017 and 2019. Much like the sales market, this demand is expected to continue surpassing the supply of rental properties, making for a prime Buy-to-Let opportunity.