UK property sales jump but lockdown rules could ‘dampen’ market

Properties in Leeds as residential home sales jump in the UK. Photo: PA
Properties in Leeds as residential home sales jump in the UK. Photo: PA

The number of homes sold in the UK jumped 15.6% between July and August, official figures show.

New HM Revenue & Customs data showed the residential property market continuing to rebound over the summer, echoing industry figures on rising sales and prices at or close to record highs.

But industry figures said rising infection rates and the prospect of tighter rules nationwide once again could undermine the sector’s recovery. Stocks in leading housebuilders Persimmon (PSN.L), Barratt Developments (BDEV.L) and Berkeley (BKG.L) also continued to fall sharply on Tuesday, ahead of a speech by prime minister Boris Johnson on tougher coronavirus restrictions.

A report by HMRC found an estimated 81,280 residential transactions took place in August. The real figure is likely to be higher, HMRC said, as some August data was “not processed in time for publication.”

The data also revealed 8,350 non-residential transactions took place in August, up 7.5% on July.

Analysts noted the stamp duty holiday and soaring demand for home moves since the pandemic and first UK lockdown hit were fuelling the residential market, but some struck a cautious tone about the future.

READ MORE: UK housing bubble ‘set to burst’ with 14% hit to prices next year

“The increase in transactions reflects the release of pent-up demand and supply, the impact of the temporary stamp duty change, and the wide availability of capital, with low interest rates and effective quantitative easing via government stimulus,” said Anna Clare Harper, CEO of asset manager SPI Capital.

Jamie Johnson, CEO of FJP Investment, also highlighted the stamp duty holiday in England and Northern Ireland, which raised the threshold temporarily to £500,000. “Buyers are flocking to the market, and this is driving house prices higher.”

Watch: What do stamp duty cuts mean for buyers and house prices?

But Johnson added ahead of prime minister Boris Johnson’s speech: “Confidence may be running high, but with the recent spike in COVID cases, the question now is whether the re-introduction of lockdown measures will dampen buyer appetite.

“While there is clear demand for property, a sudden change in circumstances could once again result in buyers temporarily retreating from the market.”

Harper noted investor sentiment was “more measured” than home buyers, noting institutional investors “tend to be nervous about the future in times of change.”

She also highlighted the importance of economic confidence, with the end of the Brexit transition period also on the horizon at the end of the year.

READ MORE: Working from home drives three-bed UK house prices to record high

Chancellor Rishi Sunak said: “Every home sold means more jobs protected — helping us to deliver on our Plan for Jobs.

“But this isn’t just about the housing market. Owners doing up their homes to sell and buyers reinvesting stamp duty savings to make their new house feel like a home are also firing up local businesses, supporting, creating and protecting jobs across the country.”

Analysts pointed out transactions remained down significantly on a year earlier, however, reflecting the continued impact of the pandemic on the market. Residential sales in August were 16.3% down on the same month the previous year.

Tighter lockdown rules are expected as infection rates have begun to rise across the UK, but their economic impact is not the only headwind facing the property market.

The Centre for Economic and Business Research (CEBR) called Britain’s property boom a “paradox” last week, coming in spite of an ailing economy only starting to emerge from the steepest recession on record.

Watch: Why are house prices rising during a recession?

The economic consultancy predicted UK property prices will plunge by 13.8% next year.

A study by the economic forecaster said many of the drivers of the recent rebound in sales and prices were “transitory in nature,” and predicted as they tail off, prices will start falling later this year.

The CEBR expects pent-up demand will “work its way out of the system” in the coming weeks, while the furlough scheme protecting millions of jobs is being wound down and mortgage possessions will resume from 31 October. Meanwhile the stamp duty holiday ends next April, with prices expected to spike shortly before the deadline and then tail off sharply.

Source Article