One Tyneside estate agent described July as “the best month for house sales in 29 years – ever since he’d been in business, in fact.” And certainly, the property market has been going like a fair since the lifting of lockdown in May.
The Halifax House Price Index recorded its highest monthly jump for property values in 11 years, for instance. That was a 1.7% rise last month compared to June. Crazy? Yes. Understandable? Absolutely. But the year-on-year increase for July is high too – a 1.5% rise compared to the same period last year.
It brings the price of the average home in the UK to £220,936. This is an increase of £4,533 on the previous month.
Pent-up demand, a desire to move from cities to the country or more rural retreats post-Covid-19 has all spurred on the average price of property. So too has Chancellor Rishi Sunak’s stamp-duty holiday for house and apartments valued at £500,000 or less. This welcome ‘further injection of life’ into the property market can save buyers as much as £15,000. Better still, it is due to last until March 2020.
Buyer Inquiries ‘Up’ Everywhere – Except London
The Royal Institution of Chartered Surveyors (RICs) reported that new buyer inquiries and agreed sales all soared last month as a result. Although, interestingly – and in line with the desire to move out of crowded cities for fear of future coronavirus outbreaks – this wasn’t the case in the capital. House prices there remained stagnant, as did buyer interest.
But the news the UK is now officially in recession this week – after suffering two consecutive economic quarters in decline – is an indicator this buoyant period of the property market isn’t going to last. And it could actually reverse.
Why? Well, economists predict that when the government’s furlough scheme ends in October thousands of people will be made unemployed. That will affect the economy and the consequences for the property could prove catastrophic.
In fact, a RICs spokesman said some of their members were preparing for a ‘boom then bust’ scenario for the property market.
Mortgage Interest Rates Creeping Up
And, although property sales are up at the moment, mortgage approvals are 40 percent less than they were prior to the onset of the pandemic in March. It’s worth noting too that mortgage interest rates have been historically low in recent months, but they are starting to rise. To the extent that average rates for both two and five-year fixed deals for all LTVs increased by 0.09% this month.
The Bank of England warns it could take a number of years before the economy recovers from the true extent coronavirus has wreaked. And the virus will continue to have an effect as social distancing measures continue.
Having said that, the property sector isn’t set to suffer to the same extent as the service sector or retail industries. That’s because people will always need somewhere to live. But property is always a reflection of the economy as a whole so, when the economy inevitably shrinks, so too will the property sector and house prices. For those looking to downsize or move, the time to sell then, is undoubtedly, now.