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Is 2020 the Perfect Time to Buy a Property?

Written by Posted On Tuesday, 28 July 2020 03:04
Is 2020 the Perfect Time to Buy a Property?

2020 is a year that will go down in history for many reasons. Not only did the UK officially leave the European Union, but the entire world has also been gripped by the devasting impact of the coronavirus pandemic. As the country moved into lockdown and everyone played their part to combat the virus, businesses across the UK shut their doors and the property market grounded to a halt.

After close to three months of uncertainty, the normal way of life we have become so accustomed to is slowly returning as bars, restaurants, shops, and estate agents to open across the UK. In an attempt to kickstart the economy back into action, the government and trade bodies have paid considerable attention to how the role of the property industry can play a part in the country’s economic return.  

To aid economic recovery the Chancellor, Rishi Sunak, announced a comprehensive set of measures to encourage spending and job retention across industries. Included in this extensive announcement of actions was the temporary inclusion of adjustments to the current stamp duty rates, increasing the threshold at which people pay to £500,000.

Stamp duty holiday

The announcement to temporarily increase the thresholds at which you pay stamp duty has been greeted with open arms from buyers struggling to purchase a property because of the financial impact of the coronavirus.

The sudden announcement to increase the minimum threshold to £500,000 has come in with immediate effect and is currently planned to stay until the 31st March 2021. So, what has changed?

For those unaware, stamp duty is a tax paid by the buyer when a sale of a property is completed. The amount of tax paid on the completion of a property is calculated as a percentage of the final sale price depending on what threshold is reached.  The announcement of the stamp duty holiday has raised the minimum threshold that buyers have to pay tax on from £125,000 to £500,000 until 31st March 2021. Therefore, anyone completing a purchase up to this price will not pay any stamp duty during the next eight months.

Fall in property prices

For the first time in eight years, the UK has witnessed a negative annual price gain according to one of the country's leading house price indices. It comes with no major surprise that house prices in the UK fell in Q2 as property transactions halted for close to two months.

According to a recent report from the building society Nationwide, house prices in June fell by 0.1% compared to June 2019, and down a further 1.4% in May. While for the average they seem relatively small margins, such a fall has a noticeable difference in finances available across the market. The fall in the growth rate has subsequently seen the average property price fall to just over £215,000.

The perfect storm for buyers

For many homeowners and buyers across the UK will be asking what this will mean going forward.

While it is almost too early to tell the full impact of the stamp duty holiday and this fall in property prices. The recent announcement has sparked a property boom in certain regions across the UK, with both high street and online estate agents recording record numbers of enquiries in the opening couple of weeks.

Under Rishi Sunak's stamp duty holiday and the fall in the average UK property price, some would argue this is a 'perfect storm' to introduce or encourage buyers to return to the property market.

Since the re-start of the property market in the middle of May, the property market has favoured buyers with the demand for property skyrocketing. The recent stamp duty holiday has, in many regards, tilted the scale further into the buyers' favour.

Lifting the barriers to moving home combined with lower property prices, will inevitably unlock more transactions across the market, especially in the regions with a large number of properties under £500,000. It is hoped this combination will help households to pursue the ability to buy property in areas with higher employment rates and more productive economic markets. Furthermore, the relief from the tax should allow more movement among homeowners freeing up the much-needed housing stock, so there will be more homes available for first-time buyers.

Homeowners, estate agents, and industry leaders will be paying close attention to what effect this may have on increasing the number of completed transactions. Due to the wide-reaching nature of the property market, the government will hope this spark a further economic recovery in sectors that benefit indirectly off the property market.

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Owen Maskell

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