UK Home Sales Hit Record High

  • UK property sales were recorded at a 16-year high.
  • Average UK house prices have increased by 8.6%.
  • Statistics evidence how the stamp duty holiday turbocharged the market.

 

About 180,690 transactions took place during March, according to official figures from HMRC. This was twice the number seen in March 2020 and the highest and the highest number recorded since HMRC began publishing the data in 2005.

Data from the Office for National Statistics (ONS) confirmed that the market frenzy has driven up house prices. ONS data showed the average home in the UK to be priced at £250,000 in February, a £20,000 rise on the same month of last year. 

The average house price in the UK increased at an annual growth rate of 8.6% (until February). This is the steepest increase in the property market since October 2014. 

Why Have House Prices Risen?

This increase comes at a time when many feared for the sake of the property market. Coronavirus lockdowns around the country caused limited viewings, closed agency doors, and forced lenders and solicitors to work from home. Despite the market freeze, the figures evidence the tremendous bounce back. As everyone held their breath, the stamp duty holiday flew in to support the market. 

The coronavirus pandemic saw estate agents close and lenders and solicitors working from home.

In March, buyers and sellers were in a rush to complete deals before the end of the stamp duty holiday. In England and Northern Ireland, the tax threshold temporarily increased to £500,000, giving buyers savings of up to £15,000. In Wales and Scotland, the bracket went up to £250,000.

Buyers shot at the opportunity to complete deals before the deadline, as reflected in the sales figures.

The pandemic also prompted a reconsideration about what people want from their homes for many Britons. As operating from home became the norm, many found themselves in properties that did not suit their work lives. Buyers who began searching for larger homes and gardens have helped drive the market and raise average house prices.

Stats & Figures

HMRC's figures note that transactions jumped by 49.6% over March. 399,060 sales were made in the first quarter of the year, making it the busiest quarter since spring 2006.

The ONS figures placed the average price of a home in the UK at £250,000 in February, increasing £20,000 on the same month of last year.

  • In England, the average price rose by 8.7% over the year to £268,000.
  • Wales saw an 8.4% increase to £180,000.
  • In Scotland, prices gained by 8% to £162,000.
  • In Northern Ireland by 5.3% to £148,000.

The north-west of England recorded the highest annual growth with an 11.9% rise, closely followed by the East Midlands and Yorkshire and the Humber. London marked the lowest development in England, at an increase of 4.6%

ONS reported a 9.1% growth in the average price of detached homes. Flats and maisonettes rose by 6.7% over the same time.

What's Next For The Property Market?

The property data collected is evidence of how the stamp duty holiday turbocharged the market. Although the tax holiday has ended, the government-backed 95% mortgage scheme launched on Monday and could help more first-time buyers get on the property ladder. 

As lockdown restrictions relax and more homes go on the market, some property experts believe that expanded choice and growing consumer confidence could prompt a second surge.


second home

Government Cracks Down On Second-Home Owners Avoiding Council Tax

  • Changes made to the tax treatment of holiday lets 
  • Crackdown On 60,000 self-catering properties in England are registered for business rates
  • Other changes stated in the Government's Tax policies and consultations publication?

The Government will tighten the rules to regulate second-home owners who are falsely claiming tax breaks.

The treasury became concerned that some people are claiming to let out their second home while putting minimal effort into doing so. This allows people to receive tax breaks that they are not entitled to. 

Some second-home owners in the UK have avoided council tax on the properties by saying that they are holiday lets. The current rules allow them to be charged business rates. Moreover, a large proportion of these properties qualify for Small Business Rate Relief. Therefore, if the property has a rateable value of less than £12,000, they are fully tax-exempt, allowing for significant savings.

New Regulations

The Government plans to toughen the rules with the new move laid out in the Government's Tax policies and consultations publication. People who state that they manage a holiday rental will be required to prove that the property is rented out for a minimum of 140 days per year.

How Relevant Is This Issue?

Government statistics show:

  • 60,000 self-catering properties in England are registered for business rates.
  • 96% of these premises have a rateable value of less than £12,000 - likely qualifying for Small Business Rates Relief. 

It is unknown how many of these are private second homes and how many are honest holiday lets. The new regulations aim to combat this uncertainty. 

How Will This Affect Second-Home Owners?

Second-home owners who have been getting business rates will be obliged to guarantee that it is rented out for at least 140 days per year. They must prove to be genuine holiday lets if they want to continue receiving the lucrative tax break. Otherwise, they will now be required to pay council tax on their property. 

Other changes made in the Government's Tax policies and consultations publication

Regulating second-home owners falsely claiming tax breaks was the most notable move in the tax policy document, but the publication also identified many other property-related changes. 

The Government published proposals to start a consultation in 2022 on creating an additional tax on the largest residential property developers. The Government's new reporting requirements also evidenced plans to simplify inheritance tax. The Tax policies and consultations publication also laid out steps towards making rules on land and property VAT exemptions clearer.


A Third of New Homeowners Say COVID Has Helped Them Get On The Property Ladder

According to new research by Yes Homebuyers, a third of homeowners say that coronavirus lockdown restrictions have helped them onto the property ladder.

The study shines a positive light on the financial hardships of lockdown. For a third of homebuyers, the lockdowns have been a helping hand in realizing their homeownership goals. Although we are all eager to return to normality, it is clear that the coronavirus restrictions also have helped Britons save up for property. The study found that 27% of recent homebuyers say the lockdown restrictions helped them save the money to buy a property.

 

lockdown property saving
On average, Brits are saving £140 each week by staying home during the lockdown.

Why has COVID helped homebuyers get on the property ladder?

During the national lockdowns in the UK, many have had little else to spend their money on. Working from home and a halt to social activities has allowed some people to save money over the course of this year. On average, Brits are saving £140 each week by staying home during the lockdown. There have also been further savings up for grabs with the government's stamp duty holiday. Some have benefited from the unfortunate circumstances in which we have all found ourselves by managing to get a foot on the property ladder.

The research shows that:

  • 46% of those questioned in the survey identified the hugely reduced social expenses as a help in buying their property.
  • 33% said working from home helped save on commuting costs 
  • 10% cited reduced family expenses
  • 6% noted an inheritance due to bereavement 
  • 5% saved money on rent by moving in with their parents during lockdown

Matthew Cooper, founder and managing director of Yes Homebuyers, stated: "There's no-one on the planet who wouldn't like to erase the last year from history, and the lockdown has been hard for so many people for a whole variety of reasons... At the same time, there have been some great stories of resolve, survival and adaptation emerging across all areas of life. This is indicative of our nation and how we come together when times are tough."


UK Named Hotspot For Overseas Property Investment

  • The UK has been named a top hotspot for overseas investment in residential property in 2021. 
  • Why is investing in UK property so attractive?
  • What are investors expecting from the year to come?

For many years, the UK property market has been a prime target for overseas investment, and this shows no sign of changing in 2021. More recently, property investors from Asia, Europe, and the US have taken a particular interest in UK property as a reliable investment opportunity. 

In a survey by international law firm DLA Piper, they named the UK a prime global property investment hotspot. 

The survey found that investors headquartered in China and the US listed the UK as the best place for investing in residential.  Property investors from the UK, Germany, France, Spain, and Italy ranked the UK as the third-best place for property investment. On the whole, investors remain positive going into 2021.

Why is investing in UK property so attractive?

Foreign property investors view the UK market as a safe haven with preferable currency exchange rates and low mortgage rates. 

Investors find British property appealing because of high demand and a shortfall in supply, significantly growing rental demand. The strong yields and attractive prices give the UK property investment solid long-term prospects for capital appreciation.

Stamp Duty Holiday

Since the stamp duty holiday came into place, foreign buyers and investors have been snapping up property across the UK well into the new year. Although the additional 2% stamp duty surcharge is set to return for overseas-based investors in April, experts feel it is unlikely to discourage overseas investors.

Value of Sterling 

The fall in sterling is just one of the benefits that will keep overseas investors interested after the reintroduction of the stamp duty tax. 

Visa Opportunities

Property experts predict a surge in interest from Hong Kong buyers and investors because of a new special visa. The new visa was opened to British National Overseas passport holders in Hong Kong on 31st January. Many Hong Kong residents will likely use this opportunity to emigrate to the UK and invest in property.

property UK2021

What are investors expecting from the year to come?

Although the global COVID-19 pandemic continues to bring uncertainty, investors remain optimistic about UK property investment. 

The DLA Piper survey reported more than half of the 500 high-net-worth investors taking part felt optimistic about the European property investment market. Just 11% felt pessimistic about this years' prospects. Additionally, 33% said they wish to invest in UK property during 2021. 

Another recent study by Property Master showed nearly half of buy-to-let investors in the UK are optimistic about the market in 2021. The statistics show that only 10% plan to leave the sector this year and nearly 70% said they do not plan to sell properties.

2021

Throughout 2021, the UK property market is likely to remain robust despite Brexit and Coronavirus uncertainties. Foreign investors are forecast to continue investing in UK property at substantial levels. The sector's resilience to political and economic difficulties has been evidenced in recent years and will allow overseas investors to persist confidently in investing in UK property.  


mortgage-2021

Mortgage rates remain at a record high as availability rises in 2021

  • Mortgage market sees the highest approval rates since 2007. 
  • Homebuyers and investors rush to beat the stamp duty holiday deadline.
  • Interest rates could drop slightly in 2021.

Mortgage approval rates

Recent Bank of England figures revealed that 105,000 mortgages were approved by building societies and banks in November – the highest level since August 2007. The approvals increase was up from 97,532 one month earlier in October and tenfold since May when numbers plummeted to 9,400.

Homebuyers and investors rush to beat the stamp duty holiday deadline

Recently, the recovering strength in mortgage borrowing shows the keen desire of many to take advantage of the stamp duty holidayThe Government put the stamp duty holiday in place to help buyers when many are facing the coronavirus's financial hardships.

According to Chancellor Rishi Sunak the average stamp duty savings have been £4,500 and, with the policy, nearly nine out of ten home buyers pay no stamp duty at all. Now the tax holiday is coming to an end the number of property sales has continued to rise, putting pressure on lenders to keep up with the demand. 

The spike in demand has put mortgage approvals at record levels, which almost offset the decline at the COVID-19 pandemic. In 2020, there were 715,300 house purchase approvals before November, close to the 722,000 seen in the same period in 2019.

Kate Faulkner, housing expert, predicts 'a lull in activity in April and May if the stamp duty holiday isn't extended' but remains optimistic that 'there is enough demand for 2021 to deliver another good year for transactions.'

 

Mortgage products 2021

As lenders are gaining more confidence, there has been a rise in the number of mortgage products available. Homebuyers and investors will continue to embrace the additional option of mortgages on offer throughout the year.

First-time buyers

The added competition in the sector affects buyers with smaller deposits the most. First-time buyers have particularly struggled to obtain mortgages since the coronavirus outbreak, but if they have at least a 10% deposit, there are now more opportunities coming to the market. 

Loan-to-value

In 2021, 95% loan-to-value (LTV) mortgages are expected to remain almost obsolete. These mortgage products will only be used by first-time buyers getting their homes through the Help to Buy scheme. The absence of 95% LTV mortgages may require some buyers to postpone their purchasing plans.

Interest rates 

During 2020, mortgage interest rates stayed competitively low, but recently interest rates have started to rise. Throughout 2021, more lenders are predicted to come back to the market, creating more competition in the sector. If this happens, interest rates could fall slightly in 2021.

Rachel Springall, finance expert, says:

"While there is still a long way for mortgage availability to reach pre-coronavirus levels, it's continuing in the right direction... with interest rates expected to remain low, 2021 could be an effective time to secure these competitive mortgage rates."


green-homes

Green property in 2021 

  • The Green Homes Grant has been extended
  • Interest in green housing is increasing
  • Homeowners have till 31st March 2021 to complete upgrades

 

In 2020, the government announced an extension of the Green Homes Grant, which attracts landlords to eco-friendly properties. The plan offers a grant to property owners to make eco-friendly renovations on their properties. 

The aim is to encourage more property owners to install energy-efficient improvements—for example, insulation, heating, draught-proofing, and double and triple glazing. Renewable energy innovations, like heat pumps or solar panels, also qualify.

How does it work?

The Green Homes scheme offers funding for up to two-thirds of the improvement costs, to the value of £5,000 per household. Homeowners and landlords wishing to use the grant have until 31st March 2021 to get their upgrades completed. 

What's the result?

The Green Homes Grant means that making energy efficiency improvements is more accessible. The government's extension of the grant has seen positive results alongside the public's growing awareness of environmental issues.

In 2021, almost 84% of British homeowners plan to address energy efficiency changes in their property, according to a study by City Plumbing.

Nearly 53% of households plan to invest in green measures specifically to reduce energy bills. The home improvements most usually chosen include upgrades to the cavity wall, loft, and underfloor insulation. Improving your property's insulation can have a significant impact on its energy performance. 

Evan Maindonald, CEO and founder of MELT Property, believes that buyers are ready to embrace sustainable living.

"If you are looking to improve the energy efficiency of your home, a good first step would be to review your property's heating system. Old-fashioned heating systems will send utility bills rocketing and have a high carbon footprint. To reduce both, consider installing an Air Source or Ground Source Heat Pump."

 

Why landlords should invest in 'green' rental properties

There are numerous benefits and incentives for landlords to invest in green housing, and now couldn't be a better time. 

More appealing buy-to-lets 

Eco-friendly properties will help landlords make their buy-to-lets more appealing and add value to their properties. 

Caters for the target tenant

Landlords who invest more in their properties to offer a place that caters to their target tenant see the most market success. Tenants are beginning to expect more from their rental properties, and as environmental issues prevail on people's minds, green housing is appealing to a wide range of tenants.

Eco-properties as an energy-efficient selling point

Landlords can now utilize eco-properties for their energy efficiency. As we all spend more time in our homes with coronavirus lockdowns, household bills go up. This will be particularly appealing for prospective tenants who are now working from home full-time.

Green mortgages as an added incentive

Lastly, green mortgages are gaining popularity. The UK population becoming increasingly eco-conscious has allowed ‘green mortgages’ to find their place in the mainstream market. The mortgages give borrowers special rates linked directly to the energy performance of their properties. This provides an added financial incentive for landlords and investors to focus on green credentials.


lease-reform

New leasehold reform: Will it make homeownership fairer?

  • New leasehold reform will save millions of leaseholders tens of thousands of pounds
  • What does the reform change?
  • Will it make homeownership fairer?

 What is the new leasehold reform?

New legislation that has been brought forward, will give leaseholders the right to extend their lease for 990 years at zero ground rent. The leasehold reform will save millions of leaseholders up to tens of thousands of pounds. The government described these measures as part of English property law's biggest reforms in 40 years.

Housing Secretary Robert Jenrick says: "Across the country, people are struggling to realise the dream of owning their own home but find the reality of being a leaseholder far too bureaucratic, burdensome and expensive.

"We want to reinforce the security that homeownership brings by changing forever the way we own homes and end some of the worst practices faced by homeowners."

What does the reform change?

The reform will give leaseholders the right to extend their lease by a maximum span of 990 years with zero ground rent. Previously, leaseholders of houses have only been able to extend their lease for 50 years at a time and had to pay ground rent. 

Leaseholders have also been met with expensive charges to extend the lease. Some of these extra costs have now been abolished with the reform, such as the "marriage value". This required leaseholders to share information with the freeholder about potential profits from extending a lease.

A cap on ground rent, the cost paid when a leaseholder extends the lease or buys the freehold, will also be introduced. An online calculator will now make it easier for leaseholders to know how much it will cost to do either. This hopes to make the costs associated with a lease more transparent.

Will it make homeownership fairer?

While the proposed leasehold reform has much to support, many in the industry feel they need some more detailed information. There are concerns that the reform has created further uncertainty for leaseholders. Moreover, there is apprehension that the proposed actions could take years to become law.

However, for many in the property industry, there is a shared hope that the reform will make homeownership fairer and put an end to the ground rent scandal.

What is the ground rent scandal?

The ground rent scandal is one of the reasons why leasehold reform is so important. Objections to the unfair expenses on leasehold flats and homes sold with unclear clauses began some years ago. Some clauses involved freeholders increasing ground rent excessively. In some cases, leaseholders saw their rent double every ten years. The increased costs left some homeowners struggling to sell their property. As a result, properties with short-leases or high ground rents are often left vacant. 

Mark Hayward, the chief policy advisor at Propertymark, discusses the organisation's research into the ground rent scandal:

"Our research' Leasehold: A Life Sentence' in 2018 found that 46 percent of leasehold house owners were unaware of the escalating ground rent when they purchased their property. Over one million households in the UK are sold through a leasehold, and this new legislation will go a long way to help thousands of homeowners caught in a leasehold trap."

 

Conclusion

Homeowners will see direct benefits from the government's leasehold reform. 4.5 million homeowners will save up to thousands to tens of thousands of pounds. Furthermore, the reform will allow leaseholders to buy a freehold for a lower price. Overall, homeownership costs will become cheaper, and property sales will be more straightforward.

Let's not forget about the benefits for properties with shorter leases. Properties with short-leases or high ground rents are sitting empty around the country as owners struggle to sell. Homebuyers will now become more open to purchasing properties with shorter leases leading to fewer stranded, vacant properties. 

All in all, the leasehold reform is provides willingly received changes to many in the property industry. The only desires that remain are for details to be made explicitly clear and actions to be fulfilled promptly.


2021-market

London Property Market 2021

  • Londoners leave the capital
  • Foreign investment to remain strong
  • Tenant demand to increase

The development of the property market will principally rely on the UK's economic resurgence from the coronavirus. In 2021, the economy is forecast to grow by 5.3%, but the recovery still faces uncertainty.

The pandemic's ambiguity meant it was a challenging year for the property sector, and it's tough to predict how the market will prove in 2021. Despite the ongoing Brexit unpredictability, the outlook for 2021 is largely positive. Industry experts are optimistic that Brexit is not likely to have much of an impact on the housing market in the short term. This year, the London property market will see Londoners continue to leave the capital while investment from overseas remains strong. Tenant demand will begin to increase and, by the end of the year, the rate of rental decline will have slowed.

The London Exodus

The COVID crisis sparked a London exodus, with a sudden scramble to purchase homes on the outskirts of the capital. As the pandemic forced most of the nation to work from home, more and more people chose to leave London.   As a result, commuter belts have widened around London and all major cities.

In 2021, the trend is set to continue with more Londoners realising the potential of working from a rural home or commuting once or twice a week. Estate agency Hamptons forecasts that the London exodus will continue for at least the first half of the new year but may slow down as house prices flatline.

Foreign Investment

Foreign investment in the capital is predicted to maintain strong levels in 2021.

Foreign investment from around the globe forms a significant share of London's property business. Despite the challenges London is facing, investors abroad have not forgotten the long-term appeal. Recent reports state London is the second-best place for property investment in Europe. The capital had climbed two spots from the previous year's 'Emerging Trends in Real Estate' report (PricewaterhouseCoopers and the Urban Land Institute). 

Local and foreign investors alike have been closing on prime property during the stamp duty holiday. Many are raring to close deals before the additional 2% tax returns for international buyers in April. However, many industry experts are confident that the charge will not deter foreign investment.

Renters and Landlords in the Capital

In 2021, the tenancy market may improve in London.

Renters in London were at a shortage in 2020 as tenants encountered financial challenges. Job uncertainty, furlough wage reductions, and redundancies had their effect on the London rented sector. Supply increased substantially in the capital, and some landlords had to accept lower rent to avoid void periods. Central London saw rent fall by 20%, according to statistics from estate agents Chestertons. Other prime London locations saw 15% decreases, and rental prices in Greater London lessened by 4%.

This year, the number of properties available to rent will likely decline. Once restrictions begin to lift, demand is likely to pick up, and the rate of rental decline will lag. If this year sees the economy recover as anticipated, rent will likely resume growth over the course of 2022.


David Beard

David Beard Comment - From Lending Expert - "Second Charge Lenders Still Have a Good Appetite"

Second charge lenders still have a good appetite, explains David Beard, the founder of Lending Expert, one of the UK's leading price comparison websites.

Beard explains that whilst the UK is in its third lockdown, the housing market remains open and property valuations can still take place, allowing applications to be processed and deals to be completed across second charge loans, mortgages, bridging loans and more.

 

David Beard, founder of Lending Expert, explained:

“While business levels were quite significantly effected during the first national lockdown in March 2020, it’s now “business as usual” during this third lockdown for the secured loans industry.” 

“January 2021 is showing that many second charge lenders still have a good appetite to lend and borrowing rates and products have mostly remained unchanged. The key differences to note are during this third national lockdown is that the housing market has remained open and lenders are able to instruct surveyors for home valuations which is critical to successfully carry out secured lending and mortgage applications.”

“This time round there is no restriction on physical valuations and for over a decade the industry has offered a huge range of products available using Hometrack or similar desktop valuation models.”

 

david beard lending expert
David Beard believes that second charge lending will thrive, despite the third lockdown

 

Stamp duty deadline also likely to play a role

With the upcoming stamp duty deadline of 31st March 2021, this will certainly play a role in boosting mortgage applications and deals in Q1. With those properties under £500,000 in the UK incurring zero stamp duty, there is certainly an incentive for first-time buyers, homeowners and developers to make an application or complete on a purchase, giving them a saving of £15,000.

With the deadline around 8 weeks away, this will certainly be a busy time for borrowers, brokers and lenders and this will continue to drive the second charge and general mortgage market, certainly in Q1.

What remains after in Q2 is yet to be determined and it could result in a major house pricing crash or a surge in house prices too.

 

About second charges

Second charge loans are used by developers and homeowners as a way to raise additional funds on an existing mortgage. The amount you can borrow is a little less than your first mortgage and it is known as a second charge because it is the second priority after your first mortgage has been paid. For developers, second charges are used to pay off existing debts, renovations, building work or finance a new property. For homeowners, second mortgages are often used to raise funds for debt consolidation, school fees, weddings and more. There is always a risk of repossession if you cannot repay your loan on time, or you may have to give up equity in your first original property to the outstanding lender.

 


tax holiday ends

Is there still time to buy before the stamp duty holiday ends?

It may still be possible for buyers to take advantage of the stamp duty holiday before it ends. The stamp duty holiday will end on the 31st of March, and buyers looking to take advantage of this opportunity may be worried that it's too late. 

Thousands set to miss out on the tax holiday

The spike in interest from buyers due to the break has caused too much demand to keep up with in some areas. Buyers searching in popular locations are faced with a lack of properties of the right price range. If they are able to find a suitable property, due to the explosive demand, there are significant processing delays in getting sales through. 

Property experts warn that many buyers may be set to miss out on the £15,000 tax saving when their sale is delayed past the deadline. The rush to take advantage of the stamp duty holiday has created a staggering backlog in regulating mortgages, valuations and conveyancing. As a result, sales that were expected to take place this month may not be complete before the holiday expires. The likelihood is that thousands will be disappointed to find that they cannot complete by the 31st of March.

Calls for the tax break to be extended

There have been calls on chancellor Rishi Sunak to extend the holiday in the face of this backlog. However, the government has responded stating assertively that the deadline will not be prolonged.

Is there still time to get a sale through before the deadline? 

If you are looking to buy a property fast to take advantage of the tax break, you may still have a chance. It helps if you are fully prepared in terms of your mortgage and surveyor. If possible, you may consider employing a mortgage broker to chase any delays on your behalf. Ideally, to complete quickly, you will have no property chain to slow the process down. Brand new homes and chain free buyers get through matters faster. Purchasing a new-build home via Help to Buy could improve your chances of meeting the deadline.

However, in reality, if you haven't had your offer accepted before the end of the year, it will be hard to complete before the March deadline. Finance, surveys, and conveyancing can take up to 12 weeks.

What if you miss the cut-off date? 

There is no need to be discouraged if you do miss the cut-off date. Some experts suggest that you may, in fact, be better off waiting on your property purchase. While your tax bill will go up in April, demand is likely to begin to cool off. As the frenzy calms, you might be able to negotiate on the asking price to find an even better deal on your new home.