This new policy, which means that the first £500,000 of all property sales are exempt from the tax, be they buy-to-let properties or starter homes, shows the importance of the Government’s recognition that the real estate market must play a key role in the UK’s post-pandemic recovery.
Property is key to recovery
So far, buyers reacted to this new policy optimistically. Property journalists began reporting a ‘mini property boom’ following the announcement as asking prices immediately increased and interest from buyers looked like it was returning to pre-pandemic levels. Property listing site Rightmove boasted of a 2.4% increase in the average asking price of new properties listed when compared to figures from March before lockdown measures were introduced. What’s more, it also recorded a 75% year-on-year increase of inquiries from potential buyers.
This all indicates that this policy is having its desired effect. Demand for property was being heavily suppressed in 2020 as the UK government disincentivised moving property due to contagion fears, and pandemic-induced economic instability weighed heavily on the minds of buyers. These recent positive signs, however, show that this demand is now returning to the market in droves.
Demand is high, but different
As with every industry, however, this ‘new normal’ after COVID won’t be exactly like it was before. With the working from home revolution looking like it’s here to stay, the need to live within a commutable distance from your company is being re-evaluated by workers across the nation. As a result, areas outside the London commuter belt are set to enjoy a new appreciation of their local property markets. The Rightmove report mentioned above also showed that interest in London properties only rose by 0.5% after the Chancellor’s announcement, indicating a change in buyer attitudes as a result of the pandemic.
London property may also be affected by another change to SDLT, that being the introduction of a SDLT overseas-buyer 2% surcharge; due to come into effect in April 2021. Given the importance of foreign investors to the prime central London (PCL) market, accounting for 55% of PCL transaction in H2 2019, this change will undoubtedly force many potential PCL buyers to take advantage of the current holiday.
Despite this, everywhere in the UK is set to enjoy the forthcoming property revival. Throughout this entire pandemic, property experts Savills have stuck by their 15% growth forecast for UK property prices by 2024 – listing the inevitable post-COVID return of the historically high demand witnessed in January 2020 as evidence for their optimism.
I’m inclined to agree with this perspective. FJP Investment recently surveyed 850 property investors and discovered that 43% weren’t making any large financial decisions until they believed COVID to be contained. It follows, then, that we should expect these buyers, and market activity generally, to return in swathes as COVID case numbers decrease.
When this happens, I’m looking forward to seeing what the new UK property market will look like. If the working from home revolution really does stick around, then we might be seeing new property-investment hotspots arise in unexpected non-urban areas. This will mean an increased demand for the construction of new-build properties, and with that, offer fantastic investment opportunities for domestic and international investors.
As COVID-19 case numbers drop and buyer confidence rise, what I can be sure of is that we’ll be seeing a UK property renewal sooner, rather than later. There is a good reason to be optimistic about the future of the market, particularly as pent-up demand for real estate is slowly released through targeted policy reforms.
