The housing market has started the new year from where it left off in 2020 – in a very positive place. There were 98,994 mortgage approvals for house purchases down 4% from December, indicating demand remains at an elevated level.
Whilst home-buying activity has surged since summer, ably assisted by the Stamp Duty cut, it is important to remember that activity had been strong in the months before the first lockdown so we are perhaps seeing a continuation of that trend. As you would expect, the pandemic has made buyers re-evaluate their housing needs whilst the tax saving has provided a financial incentive.
First-time buyer demand appears to have strengthened at the start of 2021 compared to the last few months of 2020. Whilst the majority of first-time buyers won’t benefit from the stamp duty cut, the additional relief on the value between £300,000 and £500,000 will have, in many cases, led to increased savings and reduced borrowing, particularly in London and the South East. The acceleration in household saving due to the sudden drop in expenditure during lockdowns as probably helped many raise a sizable deposit much earlier than they would expected.
There has been some speculation in the past week that Chancellor Rishi Sunak is going to extend the tax relief and allow buyers to get the full benefit, which we have been urging since last December. We would welcome this, but as we cautioned last year, an extension may just kick the can down the road, leaving many home-buyers with an unexpected bill of up to £15,000. We would like to see the Chancellor introduce a tapered approach rather than an arbitrary cut off point, to ensure that home-buyers who have agreed sales and have a mortgage approved but may be facing delays in completing their sale will still benefit from the reduction.
All information correct at time of publication.
