Over the past 3 months there have been many developments in the UK real estate market. One of the main causes for these changes has been the passing of the first stamp duty deadline. Today, I am providing an update on my previous blog, looking at the main changes that have impacted the UK real estate market and analysing the current environment for those working in this sector.
House Prices Have Risen
In August, house prices rose by 2.1% according to Nationwide, more than offsetting July’s fall of -0.6%. This brings annual house price growth to 11.0%, supporting our view that price growth will remain strong this year and on track to surpass the forecast of 9.0%.
This rise in house prices has some variation, depending on the specific location within the UK. Annual house price growth in May was strongest in Merthyr Tydfil at 16.3%, followed by Derbyshire Dales at 15.1%. Only Aberdeen saw values falls over this period, down -0.9%.
Demand Has Started to Soften, but Remains Above Supply
In the wake of the stamp duty deadline, transactions in the past months have seen a dip in demand. This can be seen in the latest RICS survey, showing demand falling but remaining above the level of new instructions on the market.
The RICS survey shows that there were only 82,110 transactions recorded in July, down from the 213,000 recorded in June. This is a monthly fall of 62% and has put transactions 22% below the 2017-19 average for the month. With the first and most significant deadline now passed, we can see the distorting effect of the stamp duty holiday. We expect a smaller spike in September before the next deadline, as buyers can still save up to £2,500 but not to the same magnitude as the June distortion.
Use of Equity
During the pandemic, there were higher numbers of more affluent buyers and, over the past months, the average income of both first-time buyers and home movers has also increased. Across all buyer types we’ve seen a greater use of equity, with the average LTV (loan to value) falling to 69%, down from 73% last June. So, lenders are more insulated from any house price falls.
The Rental Market
The average UK rent increased 1.2% in the year to July, according to the ONS. Rental growth has been strongest in the East Midlands and the South West, both up 2.5% annually. This shows the latest desire to live in rural areas following the pandemic.
Lewis Mitchell specialises in Conveyancing roles in London. If you’re interested in making a move to a firm that offers career progression, contact Lewis Mitchell at firstname.lastname@example.org