UK housing market: More than 100,000 house sales expected during Q1 2021

Summary

Property website Zoopla has predicted additional new house sales in the first three months of 2021

The website expects the property market to be busiest around the Christmas due to the unlocking of the pent-up demand from the current lockdown

The primary reason for this surge still remains the stamp duty holiday scheme which ends on 31 March

The UK housing market is set for a major expansion during the next few months. According to the British property website Zoopla, nearly 0.1 million additional property transactions are expected during Q1 2021, which would be 38 per cent higher than the corresponding demand noted during 2020.

Demand for housing has been rising exponentially over the past few months, with October already witnessing 105,000 transactions, which is the largest number of transactions in a single month since March 2016. The October numbers are 10 per cent higher than the September transactions and 8 per cent more than the number of transactions in October 2019.

While the stamp duty holiday scheme has been the primary reason for this demand uptick, the pent-up demand from the current lockdown has given additional impetus, driving sales for housing companies till 31 March next year.

Housing construction has been one of the few sectors that have seen almost consistent growth this year despite the pandemic. As the second lockdown started in November, a minor correction was seen in the home prices, which is expected to scale back after the lockdown ends on December 5, stated Zoopla.

Housing demand

Stamp duty exemption was announced by Chancellor Rishi Sunak in March. It has driven the demand and prices in the property market over the past six months. In the last one decade, this has been noticed that demands and transactions are highly sensitive to a changing stamp duty regime.

In 2016 when higher stamp duty rates were announced for second-hand home sales, the transaction volumes immediately jumped from 110,000 to 175,000. Earlier, similar demand upticks were noticed in 2012 and 2010 when stamp duty rates were revised. In the past three years, the average monthly transaction volume in the housing market has remained at nearly 100,000.

During this time, no major changes were made in the stamp duty rates. Thus, the government’s move to promote demand using stamp duty reduction as a catalyst is backed by strong empirical evidence. Moreover, the number of mortgages approved for home purchase has been at an all-time high since the stamp duty holiday scheme started. According to the Bank of England, 85,000 loans were approved in the month of September alone. The housing industry along with its ancillary sectors has been responsible for bringing about a part of the economic recovery in the UK.

Let us now take a look at the top five companies expected to perform well over the next few months.

Taylor Wimpey plc