While several sectors, including retail and hospitality, struggled in the wake of the pandemic, the UK’s housing market remained largely robust throughout the last 18 months.
The government’s announcement of a stamp duty holiday could not have come at a better time. While the country was at a standstill, capital was still permeating through this sector.
After Boris Johnson’s first ‘stay at home’ order, residential transactions plummeted to a record low in April 2020, with only 27,570 homes changing hands, the lowest level since HMRC’s records began.
However, this didn’t last long as numbers soon began to increase due to the stamp duty holiday. HMRC data showed that the number of housing transactions during this period peaked in June 2021 at 198,240, 216.1% higher than June 2020 – outdoing 2019 and 2018 levels.
The government even went as far as extending the stamp duty holiday, twice! The second one was done with a view to allow transactions to go through.
While several people welcomed the stamp duty holiday, most people who benefitted from it were already homeowners looking to upsize or downsize. Some buyers were submitting to a trend that became increasingly popular during the pandemic, which saw people moving from cities to the countryside.
First-time buyers, however, saw a sudden influx of new competition. Despite having access to the help-to-buy scheme, the support was filtered down by the newfound competition. Interest in moving home was also bolstered by the work-from-home phenomena, with an average of 37% of the UK’s population working-from-home at some point in 2020.
Rightmove had also reported that people’s requirements for new homes had changed hugely during this period, with garage, acre(s) and garden becoming the most sought-after requirements, while bungalow and character were no longer in its top ten keywords.
As soon as the stamp duty holiday ended, the number of transactions dropped drastically in October, with only 85,090 recorded, 48% fewer than the previous month.
Despite the drop in housing transactions from its peak earlier this year, housing prices have not wilted. Instead, the average house price in the UK has exceeded £250,000 for the first time ever. The Nationwide House Price Index showed growth at an increment of 9.9% in the past year, increasing by more than £30,000 since the beginning of the pandemic.
The increase of house prices concurrently with the imminent rise of interest rates may result ina slump in the housing market for a short period of time. But as always, it will bounce back.