Property market gets ready for September homebuying surge
Another spike in residential transactions is set to occur this September as the last stage of the stamp duty holiday phases out, it has been predicted.
Economic research firm Capital Economics’ housing market outlook said “robust demand” for property would limit any sharp drop in transactions in Q4 once the tax break goes completely.
Transactions reached a record high of 198,000 in June coinciding with the end of the first stage of stamp duty holiday, which allowed a tax break on up to £500,000 of a property purchase. The transaction level was significantly above the pre-pandemic norm of 100,000 a month.
Activity wound down in July when the threshold for the stamp duty holiday fell to £250,000. The latest data from HMRC showed there were 73,740 transactions during the month.
Sales instructions fell more sharply, Capital Economics said, indicating that the surge in home moving was subsiding. Data from the Royal Institution of Chartered Surveyors (RICS) showed this dropped from a net balance of -1 per cent to -23 per cent in July.
A lack of second hand stock will underpin demand and prevent house prices from crashing, Capital Economics said. Conversely, the firm said this suggested “house prices will rise further in the near term”.
This will also drive demand towards new-build homes.
The firm added: “Even when comparing to June 2020, which saw reservations leap after the housing market reopened, homebuilders report that demand took a further step up this June.”
Capital Economics also predicted the ending of furlough and the repossessions ban would have little impact on the housing market. It said this was evident in the recovery of mortgage repayments and the fact that few mortgage holidays were still in place.
“Despite that, arrears have not risen,” the report stated.
It also pointed to economic indicators which showed the economy was almost back to its pre-virus size.
GDP rose by one per cent month-on-month in June, which was 2.2 per cent below its pre-Covid-19 level.
Additionally, the firm said the dip in CPI from 2.5 per cent in June to two per cent in in July would not last long and predicted it would rise to four per cent by December.
However, it said the Bank of England likely would not increase the base rate until 2023 “so long as higher inflation doesn’t become entrenched in expectations or underlying wage growth”.