What's in store for the housing market?

By Jo Bentham20th November 2020

When a second national lockdown was announced on October 31, the housing market escaped a full shut down, much to the delight of house builders, buyers and sellers alike.

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In contrast to restrictions placed on the market during the first lockdown in March - where house viewings, home moves and most construction ceased for its duration - lockdown 2.0, as it has been dubbed, will see the market remain open with strict social distancing measures in place. 

This is good news for those making the most of the housing mini-boom which ensued after the market reopened in May following the first lockdown, and those racing to take advantage of the stamp duty holiday before it ends on March 31 2021. 

Throughout the Coronavirus crisis, property has proven itself to be a somewhat resilient sector. The housing market’s bounce-back after the initial lockdown was lifted - which saw housing demand jump by 80% in the week following the easing of restrictions, according to Zoopla’s UK Cities House Price Index Report - was promising. 

And this upward trend has continued in the months since, as the Office for National Statistics (ONS) reported that house prices hit a record high with a leap of 4.7% over the year, and the number of valuations of homes being put up for sale was up by 38% in the week after Prime Minister Boris Johnson announced the second lockdown. 

But what’s in store for the housing market during lockdown two and beyond?

 

Measures from the Government to give the housing market a boost appear to be working

Before Rishi Sunak, Chancellor of the Exchequer, announced the stamp duty holiday that meant those purchasing a main home costing less than £500,000 would pay no stamp duty land tax, pent-up demand was already off the charts. 

But in the first half hour after the announcement, the UK’s leading property portal, Rightmove, reported a 22% increase in visitors to their site, and stated that the number of potential buyers contacting estate agents about properties for sale was up 93% on the same day in 2019. 

Read more:is property a good investment in 2020?

A new report on UK house prices from the ONS, mentioned above, which shows that the UK average hit £245,000 in September, is considered to be the first to reflect the impact from the tax changes.

The ONS said: ‘Recent price increases may reflect a range of factors including pent-up demand, some possible changes in housing preferences since the pandemic, and a response to the changes made to property transaction taxes across the nations.’

And, likely due to the boom in house sales inspired by the stamp duty holiday, the number of exchanges on properties increased by 11% in the week following the announcement of lockdown two. 

As well as this, the housing market’s continued growth has helped to fuel a rebound for the construction industry - an industry whose success is crucial to the recovery of the UK’s economy, contributing around £31 billion per year.

 

A new Help to Buy scheme has been announced

The Government’s Help to Buy scheme as we know it is due to end on 31 March 2021 (however, some extensions have been granted as COVID-19 caused delays). 

But a new Help to Buy Equity Loan scheme has been announced, benefiting first-time buyers looking to purchase new-build homes. 

Applications for the new scheme commence on 16 December 2020, and it will run until 2023. 

Through the scheme, the Government lends buyers up to 20% - or 40% in London - of the cost of a newly built home. Then, buyers must pay a deposit of 5% or more and arrange a mortgage of 25% or more to make up the rest. 

Will German, Director of Help to Buy at Homes England, said: ‘Help to Buy has already helped more than 270,000 people into home ownership, and 82% are first-time buyers. The new Help to Buy builds on this success with first-time buyers in front of mind.’

‘Housing, like most sectors, has experienced a slow down during the COVID crisis. But Help to Buy continues to give homebuilders the confidence to keep on building at a more crucial time than ever.’

The new Help to Buy scheme is, of course, good news for first-time buyers. But it’s also positive for house builders, such as Homes by Carlton (MAVEN Bonds’ strategic housing delivery partner), who are delivering high quality homes, and investors into the likes of the MAVEN Bonds IFISA, whose potential returns are generated by the development and sale of new-build homes.

Read more:calculate potential returns with a MAVEN Bonds IFISA

 

The potential vaccine could further bolster the housing market

When Pfizer-BioNTech announced that their Coronavirus vaccine is more than 90% effective - with other vaccine trials reporting good preliminary data shortly after - optimism was rife. 

There were several consecutive daily gains on the FTSE 100, and some financial experts suggested that GDP could return to pre-pandemic levels by the middle of next year.

Though there is still a fair way to go before a vaccine is available to the public, and there are no guarantees, a sense of optimism is key for the housing market. 

The mere hint that normal life could resume in the close future propelled potential buyers into action, and this is expected to continue in response to positive vaccine-related news. 

 

The MAVEN Bonds product is available exclusively to experienced investors who are classified as either sophisticated investors, high-net-worth individuals or professional investors and have the knowledge and experience to make their own investment decisions. Investments are high risk and illiquid, your capital is at risk and returns are not guaranteed. Bonds are not protected by the Financial Services Compensation Scheme (FSCS).