Has Sunak’s Stamp Duty Holiday Led to The Upbeat Demand Scenario for The UK Property Market?

Summary

• After the announcement of stamp duty holidays, the property market has moved upwards with a good amount of increase in the number of buyers registering to purchase homes.
• The chancellor, Rishi Sunak, in his summer financial statement, had announced a stamp duty holiday on buying properties costing up to £500,000
• Since southern regions are traditionally known to attract higher prices for its properties and along with stamp duty holidays, the buyers are likely to be benefited by choosing homes in the region

The property market in the UK has shown strong upmove in the last one month with a 38 per cent increase in the number of buyers registering to purchase homes across the country, over the same period in 2019. The data is part of a research conducted by Hamptons International, a leading estate agent chain that provides an extensive portfolio in the UK and international properties. This upward trend in the interests of the buyers has been recorded after the chancellor, Rishi Sunak, in his summer financial statement, announced to remove the stamp duty on buying properties that would cost up to £500,000.

Has Stamp duty holiday boosted the property market?

The study revealed that most of the buyer interests converted into a meaningful search for property. There was a 92 per cent and 74 per cent year-on-year (YOY) rise in the total number of buyers choosing properties between £500,000 and £750,000 and properties costing £750,000 and £1 million, respectively. The Chancellor of the Exchequer, Rishi Sunak as part of a package of measures to support jobs, had come with a scheme to raise the stamp duty threshold from £125,000 to £500,000 in England and Northern Ireland that would run till 31 March next year.

It is evident from the rush that Britishers started showing interest in buying a new house as soon as the lockdown restrictions were lifted. The factors that drove the interest included need for a new or bigger house to accommodate the various requirements to work from home schedule, besides a significant interest in moving to a property outside the cities. In the last one month, the registrations for properties located outside the cities rose by almost 49 per cent. There was a 43 per cent rise in the interest shown by the buyers for properties located at the towns and suburbs. The city homes recorded a 20 per cent rise in demand. According to the provisions of the stamp duty holiday, buyers would be able to save £15,000 on purchasing properties worth £500,000 and beyond.

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The research study presented that this growth in buyer interests also led to increased competition in the prices being offered. In comparison with the same time in 2019 that recorded 25 per cent of the sellers receiving bids from three or more buyers, increased to 30 per cent for 2020. And, the agreed price as a percentage of asking price increased significantly.

The underlying objective behind the lucrative scheme from the treasury is intended towards the government’s various steps to support jobs in the country. The move applied earlier only to sales in England and Northern Ireland but soon had been expanded to Wales and Scotland. These parts of the country saw an increase in the tax-free threshold to £250,000.

Performance of some stocks in the real estate sector

Below we bring the stock performance of some of the companies in the real estate sector:

British Land Company plc (LON:BLND): Headquartered in London, British Land Company is one of the largest property development and investment companies in the UK. It is known to create and manage places that reflect the changing needs of the people who work, visit or stay in and around them. With an occupancy rate of 96.6 per cent, the company’s total assets under management comprise of £14.8 billion. The worth of land owned by the company in Britain is £11.2 billion.

On 11 August 2020, at 10.31 AM, the company’s stock was trading at £379.80 up 2.48 per cent from previous day’s close at 370.60. The 52-week low-high range was recorded as GBX 313.80 and GBX 638.80. With a market capitalisation (Mcap) of £3,434.32 million, the stock provided a negative return on the price of -41.01 per cent on a year to date (YTD) basis. The total volume of shares traded at the time of reporting was recorded at 741,342.

Great Portland Estates Plc (LON:GPOR) - A constituent of the FTSE 250 Index of the London Stock Exchange, Great Portland Estates is a British property development and investment company. In 2007, the company switched to Real Estate Investment Trust status (REITs). Its 100 per cent central London-focused property portfolio includes purpose-built new developments and carefully refurbished spaces and historic buildings, besides commercial, residential, and retail usage.

On 11 August 2020, at 12.18 PM, the company’s stock was trading at £608.00 up 0.20 per cent from previous day’s close at 606.80. The 52-week low-high range was recorded as GBX 550.00 and GBX 966.00. With a market capitalisation (Mcap) of £1,540.47 million, the stock provided a negative return on the price of -29.44 per cent on a year to date (YTD) basis. The total volume of shares traded at the time of reporting was recorded at 64,159.

Barratt Developments (LON:BDEV): Barratt Developments is one of the largest builders in the UK and is known for creating great new places to live throughout the country. The business comprises of land acquisition, securing permission for planning, and building quality homes at locations where people aspire to live. Barratt operates through its 27 operating divisions, and its consumer brands are called Barratt Homes, David Wilson, and Barratt London. It offers stylish apartments in London city apart from luxury detached houses in the beautiful countryside. Its commercial business, Wilson Bowden, creates spaces from industrial and office buildings to retail and leisure.

On 11 August 2020, at 12.39 PM, the company’s stock was trading at £507.20 up 0.76 per cent from previous day’s close at 503.40. The 52-week low-high range was recorded as GBX 364.70 and GBX 878.40. With a market capitalisation (Mcap) of £5,126.16 million, the stock provided a negative return on the price of 33.06 per cent on a year to date (YTD) basis. The total volume of shares traded at the time of reporting was recorded at 1,303,678.

Experts view on trends in the property market

Given an increased interest of people to buy a new house in the different region in the country, the southern regions have recorded a sharp increase. Industry experts believe that since southern regions are traditionally known to attract higher prices for its properties and because of the stamp duty holidays, the buyers are likely to be benefited by choosing homes in the region.

On the same time some others are of the opinion that as more and more buyers have preferred to have a bigger and spacious home, it is expected that the properties located at the suburbs and countryside would attract selling price higher than their asking price. If this trend continues, it will decrease the gap between prices for city-based and country-located properties.

Conclusion

The latest trend indicates that the stamp duty holiday announced by the government a month back has significantly increased the interests of Britishers to purchase a new property. There has been a rise in enquiry and deal finalisation as well, which is good for the players of the industry and has increased competition at the offer stage, resulting into a win-win situation for the buyers as well.