Evidence suggests that the UK government’s efforts to stimulate the real estate market are paying off, with the latest figures indicating a surge of activity last month. Spurred at least partially by the extension of the stamp duty holiday, data from HM Revenue and Customs (HMRC) indicates that the highest volume of property transactions since 2005 took place in March.
This impressive and largely unexpected 16-year high suggests that the real estate market has not been affected by the COVID-19 crisis nearly as significantly as anticipated. While there have been major shifts in preferences and areas of interest across the UK, the number of people intent on moving is as high as ever.
The same can also be said for average UK house prices, which for the month of March were up approximately 8.6% on the year before.
A buoyant and boomy spring property market
According to the non-seasonally adjusted figures released by HMRC, exactly 180,690 UK home sales were completed last month. This represents an impressive 50% increase from February and more than twice the number of homes sold in March 2020.
Market watchers had anticipated a significant slowdown in activity during February as the public waited for news on a potential extension to the temporary stamp duty holiday. When the chancellor announced in the Budget on March 4 that stamp duty relief would be extended throughout the summer for most home purchases in England, Wales, and Northern Ireland, a wave of pent-up demand was subsequently released on the market.
In addition, the government also introduced an initiative to encourage high-street lenders to reintroduce 95% LTV mortgages, enabling buyers to qualify for mortgages with a deposit of just 5%. This subsequently proved instrumental in motivating many first-time buyers to take action, who had previously been priced out of the market with typical deposit requirements of 10% to 20%.
A temporary surge or sustainable growth?
Speaking on behalf of property lender MT Finance, commercial director Gareth Lewis questioned whether the market’s current strong performance could be maintained.
“What will be interesting to see is whether this growth is sustainable or simply a reaction to the stamp duty holiday. The next three months will give us a better indication of this,” he said.
“As much as this latest lockdown in particular has been hard, it is encouraging that people have not hunkered down and retreated but carried on with their plans to move.”
While movers and first-time buyers are being encouraged by the government to take action, concerns grow over rapidly escalating property prices in key regions across the country. Annual house price growth recently hit a six-year high, fuelled by the major spike in demand prompted by the government’s stimulus efforts.
According to the Office for National Statistics (ONS), the average asking price for a home in England was up 8.7% year-on-year in February to reach a new high of £268,000.