AUS
NZ
UK
CA
USA
IND
Summary
- The asking price of housing in July 2020 was 2.4 per cent higher than its early March levels: Rightmove’s House Price Index
- Government should convert town centres into houses: Social Market Foundation
- A surge in divorce enquiries is also pushing up the home sales
- The future of the sector appears bright; however, it is a little too early to make any realistic projections
The housing market in the UK was adversely affected as a result of the coronavirus pandemic. With lockdown lasting many weeks and social distancing norms still being adhered to, the sector’s growth has been sluggish. According to the government statistics, residential property sales dropped by a hefty 50 per cent during April to May 2020, as compared to the same period last year.
However, lately with positive developments like lifting of restrictions and government’s announcements like a stamp duty waiver for homes priced below £500,000, the activity levels have increased in the residential property market. Let us take a closer look at few recent developments.
July House Price Index by Rightmove
According to the recently released House Price Index for July 2020 by Rightmove, the average asking price of homes coming into the housing market in July 2020 was £320,265. This was a 2.4 per cent increase over March 2020 levels seen before the lockdown was imposed on 23 March. Rightmove is a UK based leading property portal.
Further, on a y-o-y basis, this was a 3.7 per cent rise over the same month last year in 2019, and the highest monthly jump recorded since December 2016.
The real estate portal also noted that inquiries from buyers have also increased by 75 per cent since the beginning of July 2020.
The stamp duty waiver has come as a good move from the government, and the initial response is overwhelming, noted the real estate portal. During the first five days after the duty waiver was announced, home sales jumped by 35 per cent in England as compared to the same days in 2019.
Convert vacant retail spaces into homes: Social Market Foundation (SMF)
SMF has released a report titled ‘A new life for the high street’ on 22 July 2020. It suggested that the government should convert city and town centres across the United Kingdom into houses, which will give a boost to the sector. It will not just utilise the existing vacant retail areas, but will also provide at least 0.8 million more homes to people. This is based on the assumption of using just 5 per cent of the existing commercial land in England for building residential homes. In case more than is utilised, a larger number of houses could be constructed.
It will revive economic activity by integrating homes and offices in these town centres, and make spaces where everyone can live, socialise and work at the same time.
SMF is a reputed independent political policy institution, based out of London.
The foundation elaborated that it is merely wishful thinking to presume that the country’s high streets will again be bursting with high-footfalls like before, in times to come. The main reasons for this are the advent of the unexpected coronavirus pandemic, the accelerated pace of online shopping, and the rising trend of working from home.
This seems to be in line with UK government’s plans to revive the high streets. On 30 June 2020, the PM Boris Johnson had said that he is contemplating about converting empty shops at town centres into homes, cafes, or offices, without the need for a planning permission from the local authorities. Legislative changes are expected to be announced by September 2020 in this regard. This move is likely to line up new construction projects across the United Kingdom.
The foundation also suggested the government to partly write-off Public Works Loan Board’s (PWLB) debt worth £80 billion and transfer it to the central government. This would enable the local authorities to invest afresh in the urban community building projects, and also add to new jobs.
SMF has also requested the government to provide tax incentives to selected social housing & infrastructure projects, which employ low pay workers, who have been displaced due to the coronavirus pandemic.
A surge in divorce enquiries driving home sales
According to the Co-op Legal Services, divorce enquiries have soared by about 40 per cent since the beginning of the Covid-led lockdown. Higher number of break-ups have resulted in more people seeking out for new homes.
Even the rentals are rising, and one of the likely reasons is the break-ups. According to Rightmove data, the asking rents outside London showed a record jump during June 2020. Other property agents such as James Pendleton, and Garrington Property Finders have also confirmed the trend.
Outlook
The residential property demand now seems to be getting stronger and housing industry is moving in the right direction. There could also be some pent-up demand that would strengthen the home prices for few more weeks to come, before settling in at a new level.
The housing market in the UK is characterised by a chronic shortage of supply, and this will make it a sellers’ market for at least few more years to come, with demand outpacing supply. The stamp duty waiver, though recently announced (on 8 July 2020) has already begun to bring cheer to home buyers, and the trend is likely to continue. The waiver is applicable from July 2020 to March 2021.
The interest rates are also at an all-time low level of 0.1 per cent. This is also expected to push up the demand for houses in the near future.
At the same time, one can’t ignore the fact that there exists, on the flip side, an uncertainty looming large over the ongoing pandemic conditions, with rising unemployment levels in the economy, and affecting most of the non-essentials sectors adversely.
So, to sum up, even though it is too early to suggest if the UK housing market has already entered a sustained growth trajectory or not, but more clarity will soon emerge in the few weeks to come.
