Bubble trouble for the housing market?

House prices hit an all-time high in August, with the post-lockdown boom sparking the biggest monthly rise in 16 years. So says Nationwide building society, whose long-running housing survey was released this week with figures so positive that it has prompted some agents to describe the market as a bubble.

The lender reports that demand from buyers is 34 per cent higher than a year ago, no mean feat when you consider that August is usually pretty quiet for the market as everyone disappears off on holiday. Not this year, of course, with staycations the order of the day and those who have put off decisions to move because of Brexit and then Covid, not willing to wait any longer.

Meanwhile, the combined Office for National Statistics/Land Registry data released this week revealed that the average property price rose by 2.9 per cent in May, up from 2.7 per cent in April.

The housing market has seen an unexpected and rapid recovery in activity since lockdown eased. We have seen this at PLG, while the team remained busy throughout lockdown, August has seen activity off the scale, and while it’s still early days, so far the same has been true of September. We are searching for a number of rental and forever homes, while the architectural team are hard at it adapting homes we have already found to ensure they are as near as we can get them to perfect for our clients.

If only we had a crystal ball…
but sadly nobody does. While the signs are encouraging, it’s important not to get too carried away and read too much into the latest housing data. Agreed sales are up but this reflects pent-up demand, the stamp duty holiday and people fed up with waiting years to move until there was some resolution on Brexit. There is also a large dark cloud on the horizon in the form of the end of the furlough scheme in October. If this results in significant job losses, and to be fair we have already seen quite a few announced, this could have a knock-on effect. Especially on confidence which, in my long held belief, is the lifeblood of the housing market. Indeed, the EY Item Club, forecasts that house prices will be 3 per cent lower at the end of the year which, if accurate, would be an equally dramatic change to what we are seeing right now.

Another potential issue is the ability to get a mortgage, although thankfully this is not a concern for our clients, as they don’t need mortgages. Lenders are tightening affordability criteria and reducing the number of high loan-to-value deals available; if first-time buyers in particular can’t purchase, this will have a knock-on impact further up the housing ladder.

And then, of course, we have the end of the stamp duty holiday on 31 March, although there is always a chance the Chancellor may extend it given its significant success in boosting activity in the market. With stock levels low and more buyers in the market, it’s inevitable that prices have risen. In real terms the rises are still quite modest and for our clients, who are most likely going to be in situ for many years, it is worth it to secure the right property when there is little stock and fierce competition. However, for the rest of the market the big question is: if you save money on stamp duty but end up paying an overinflated price for the property which is then repaid over 25 years, is it really any saving at all?

The PLG experience.
Our team is on the road day in, day out, viewing countless properties to rent and for sale up and down the country, trying to deal with those agents which are still furloughed, which continues to be a frustration, and satisfy our clients’ demands. We are busy and have big plans for the autumn, which we look forward to sharing with you soon. In the meantime, if your clients could use our help and advice, please get in touch, we are always happy to chat.

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