What next for the housing market?

I remember discussing the housing market with colleagues as Covid 19 started to take grip – pondering if it would turn into a stranglehold.  Threats to the job market looming, businesses under pressure, and for those wishing to buy or move, not being able to physically view houses.  There were whispers of a housing market downturn.
Should we think of houses as investments or foremost our homes?

The government became the employer of last resort and a stamp duty holiday was introduced, tapering in June 2021, until finally coming to an end in October.  

With the government ‘stay at home’ restrictions we experienced one of the biggest changes to work patterns that I can remember.  People working from home and actually enjoying it, maybe not five days a week but for some of it. The quest for houses with spare rooms offering capacity for office space and leafier suburbs for the hour of freedom was on!  Anecdotally we have seen many of our clients undertake house improvements, improving their living arrangements and likely adding value.

UK mortgage approvals are up 827% year on year (May 21) and house prices recorded their highest growth rate since 2014.  Nationwide’s latest index shows house prices are up 13.4% annually.  Houses are selling fast in the current environment and Halifax are stating that they are likely to continue for some time. 

Inflated house prices bring inequality

It is argued, the stamp duty holiday has distorted the property market and sent house prices soaring. With house prices continuing to rise this can cause greater inequality, making it even harder for first-time buyers to get on the property ladder.  This could lead to greater pressures on the bank of mum and dad – although, I am not sure they build parental wallets and purses this big!

On the plus side, first-time buyers could soon get a competitive advantage back, as from October 1st only first time buyers will get the stamp duty relief (on property worth less than £300,000).  Hopefully this will calm the buy-to-let investors too.

The Big Question

How long can this property boom keep going?  There is a view that having pushed hard to beat the stamp duty deadline the fire will not burn as bright, but it is expected to keep burning for this year and next.  

What does that mean for most of us?  I wonder if all too often we forget that first and foremost our houses are homes, not an investment.  It’s nice to know that we have equity, providing a warm feeling if we own more than the bank, but for most our home is a long term (I want to use the word investment) hold so we should not be overly concerned.

You may be aware from previous articles we are not a big fan of properties for investment purposes.  The government makes it more costly for additional property ownership, higher stamp duty and capital gains tax rates.   We are believers in diversification and for many, properties will be one of the biggest assets (it should be your pension) so adding additional property and therefore investing in the same asset class can be questionable.

Your home is your castle

My conclusion – do your best to make sure you are happy with your home and where you live, we are spending more and more time in that space.  If it makes you money – great, if the markets stay flat then you still have a lovely home and a place of refuge and safety.

Always remember your home may be repossessed if you do not keep up repayments on your mortgage.


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