Darren Murphy's market update

Posted on Wednesday, April 28, 2021

The residential property market has been incredibly busy in recent weeks and months, with the sales market fuelled by the stamp duty holiday (zero tax up to £500,000) that was scheduled to end on 31st March 2021.

The Government has extended this holiday to 30th June and, in addition, have announced that a reduced level of benefit (zero tax up to £250,000) will apply until the end of September 2021.

The surge of activity has placed considerable pressures on the home buying and selling process although these are easing a little now with the immediate pressures of a “cliff edge” deadline being kicked down the road a little.

The market has demonstrated that there is a huge pent-up demand from people looking to move or buy for the first time and the Government has recently announced support for mortgages of up to 95% loan to value.

This type of Government support certainly fuels the demand side of the equation but does much less for the supply side and, as a consequence, we are seeing property prices rise and buyers frustrated that they are in competition with many others for every property that comes to the market.

The easing of lockdown restrictions is underway and the roll out of vaccines is going well. Both of these factors are creating a growing feeling of optimism that we will see a rapid and strong period of economic growth in the months ahead as entire sectors are able to return to work (retail, hospitality etc.) and levels of unemployment hopefully reduce.

Unemployment levels have, understandably, increased during the pandemic but the Government JRS scheme, grants and loans has undoubtedly reduced the damage for many, although not all.

The sales market looks set to continue strongly, we have historically low interest rates and lenders are looking to lend. The Government has also just launched a 95% mortgage indemnity guarantee scheme to encourage lenders to help borrowers with lower deposits. The inability to spend over the last year has also seen those who have maintained income able to save and build their personal funds.

The stamp duty holiday has undoubtedly brought forward many people’s plans to move but there remains considerable demand. House prices have risen and are likely to continue to do so whilst demand exceeds supply.

The lettings market is also strong and some landlords have taken the opportunity afforded by the stamp duty holiday to expand their portfolios. By its nature, the rental sector tends to have a higher percentage of younger people as tenants and they have been harder hit by unemployment during the depths of the pandemic. Issues with ability to pay rent are easing as lockdown restrictions are lifted and employment prospects improve. Likewise, the student market will almost certainly be stronger entering the next academic year than it has been during the last.

Whilst there remain a few unknowns going forward, the immediate outlook is very positive. The longer term effects on our economy of Brexit remain uncertain but the lull in world activity during the pandemic is enabling the time to be used in securing new trading arrangements across the rest of the world.

Of course, at some point, we will have to start managing and repaying the huge UK debt that has built up during the covid crisis. Fortunately, interest rates are at historically low levels which reduces some of the pressure and rapid growth in GDP will increase the UK tax take. We are already seeing numbers that show that the stamp duty holiday has, by virtue of increasing transactional volumes, not resulted in a significant loss of tax revenues. We also have a Government that is ideologically keen to encourage home ownership and also to invest in grand infrastructure projects such as high speed rail, superfast broadband and green energy, all of which could create economic benefits in the coming years.  

For all the positives, we can, however, expect to see changes in taxation policy emerge over the next year or two as we look to get the UK back on a more even footing but will hopefully do so from a much improved foundation.

As always, the team and myself are here to discuss your requirements and goals and the best way of achieving them.


Darren Murphy 

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