Is now a good time to buy a home? Judging by the surge in activity shown in the latest data, plenty of people in the UK think the answer is a resounding Yes.
Lights are flashing green across the board. Over the past fortnight evidence has been piling up in official statistics, as well as in data from agents and lenders. The number of sales agreed is up, along with new instructions from sellers, new buyers on the hunt and — yes — in rising house prices.
The Royal Institution of Chartered Surveyors this week revealed more signs of exuberance with its latest monthly survey of agents and property surveyors. A balance of 44 per cent of those surveyed reported an increase in house prices in August — the highest number for four years.
Tom Wilson, an estate agent with Stamford-based King West, told the Rics researchers: “There is no sign of the wave of enthusiasm breaking, with activity in appraisals, viewings and successfully agreed sales all ahead of where we’d expect it.”
But this mini-boom in the UK housing market also carries a distinctly surreal air. Buyers and sellers know full well that economic clouds are gathering on the horizon later this year and into 2021. Furlough, mortgage payment holidays and the stamp duty holiday will come to an end (barring a ministerial change of heart), Covid-19 restrictions are likely to continue to constrain the wider recovery and few expect a full-strength Brexit in the new year to be disruption-free.
Most of the same agents reporting an upsurge in the market today believe the future is much shakier, expecting housing activity and prices to soften over the next 12 months. “There’s an element of caution in every conversation,” added Mr Wilson.
The tension between today’s confidence and tomorrow’s uncertainty was apparent to experts assessing the state of the UK property market at last week’s FT Weekend Digital Festival. Henry Pryor, an independent buying agent, has been counselling clients against buying if they don’t need to, since prices may well look more attractive later this year or in 2021.
“There are only two reasons you should be buying a home in September 2020,” he told festival viewers. One is a life-changing event or a change in circumstances that forces a move. “The other is if you’ve found a property you’re confident is sitting on either oil or gold.”
But his clients are ignoring this advice — and not just because of a shortage of UK gold mines and oilfields. “Lots of people are using the expression ‘I’m going to live here for five or 10 years’. They don’t really mind [if prices fall] because they’re taking the long view on it. They’re bullish, they’re getting out there, they want to get on with their lives,” he says.
It is not a recovery that suits everyone. Caution among mortgage lenders over the economic outlook has made it harder for higher-risk borrowers to participate, instead favouring cash buyers or home movers with high levels of equity that serve to lubricate a purchase.
Aneisha Beveridge, research director at agent Hamptons International and another guest on the festival panel, says sellers in England and Wales this year sold their home on average for £80,000 more than they paid for it.
“But in July alone, that number rises to over £100,000,” she says. “It points to the fact that sellers have owned for longer, or are selling more expensive properties in London and the Southeast where they’ve had time to build up equity.”
Among these buyers and sellers (many will be both), the room for manoeuvre on pricing has changed dramatically since April and May. Then, many buyers participating in an FT Money Q&A on the property market were chiefly concerned with how much they would be able to chip off the seller’s asking price, on the basis of the economic ruin they were claiming lay just ahead.
Today, sellers are much less willing to offer discounts. “The difference between buyer and seller expectations seems closer at the moment,” says Ms Beveridge.
A spur to recovery has been the nine-month stamp duty holiday announced in early July, adding to momentum that began after lockdown restrictions eased. The holiday, which raised the threshold for the tax to £500,000 in England and Northern Ireland, handed buyers of pricier properties the maximum £15,000 saving.
But buyers should beware assuming that this benefit flows straightforwardly in their direction. In an illustration of the distorting effects of tax change, Mr Pryor said he handled two deals last week, both with prices agreed before the stamp duty announcement, which were now moving towards exchange.
At the last moment the sellers had demanded an extra £15,000 from the buyers, on the grounds that this would leave the buyer effectively “no worse off” than they had been before July, since they were no longer required to send this money to the exchequer. Not wanting to risk losing the purchase in a busy market, both sets of buyers caved in.
“In reality, people will use the £15,000 to compete with each other to buy the property that is in short supply,” Mr Pryor says. “As a result, prices will go up for the period of the holiday, and when it finishes presumably prices will fall back down again.”
Ms Beveridge is in agreement on the timing. She anticipates a slight slowdown in activity before the end of the year, with a resurgence in February and March as people try to beat the March 31 end date for the stamp duty holiday. After that, she is less optimistic. “It’s the second quarter of 2021 that’s looking at most risk at the moment.”
Homebuyers who purchase now ought not to be surprised if values take a tumble in the short to medium term. Those settling down for the long term may not care — but it will be hard to argue they had not been given due warning.