Only a few days after the Chancellor Rishi Sunak delivered the 2021 Spring Budget, the property market was already feeling the impact of the reforms announced.
In short, the decision to extend the Stamp Duty holiday from the end of March until the end of June sparked an increase in buyers’ enquiries for new property opportunities.
Rightmove recorded its busiest day on record – on the day the budget was announced on 3 March, the property site received over nine million site visits.
This is the highest number of daily visits since the Rightmove site was first launched 20 years ago.
In many respects, this should not have come as much of a surprise. When the Stamp Duty holiday first came into play on 8 July 2020, estate agencies experienced a similar spike in enquiries.
What’s more, despite the complications posed by social distancing restrictions, these enquiries were converting into sales.
By the end of the year, Nationwide and Halifax’s separate house price indexes noted that house prices had risen by over 5% over the course of 2020.
Given the sluggish performance of the property market in 2019 as a result of the uncertainty surrounding Brexit, the rate of house price growth came as a pleasant surprise.
At the time, the concern was that buyer momentum would eventually wane and the rate of house price growth would drop to a more consistent level.
Indeed, the house price indexes for January 2021 showed for the first time since the holiday was introduced that the rate of annual growth was dropping.
Now, buyer momentum has once again picked up, with the Spring Budget offering an additional three months for international and domestic buyers to take advantage of the holiday.
The flurry in activity has also resulted in many estate agencies revising their price forecasts for 2021.
For example, Savills is forecasting house prices to rise by 4% in 2021, 5% in 2022 and 4% in 2023.
While these percentages could change based on whether the country does effectively transition out of lockdown, it demonstrates the underlying attractiveness of UK real estate as an asset class.
The prime property market recovery
Part of the success of the Stamp Duty holiday has to do with the fact that it also applies to international buyers.
For certain segments of the property market, like prime real estate in central London, this has proven very significant.
Prime real estate is an attractive asset for international buyers. In 2019 alone, international buyers were responsible for over half (55%) of all prime central London (PCL) property transactions. Its historical resilience and rate of capital growth over long-term periods ensures consistent market demand for bricks and mortar in the capital.
COVID-19 has not dampened this demand, particularly when it comes to buyers based in Hong Kong, mainland China, and Singapore.
And even with a 2% SDLT surcharge coming into play in April 2021 for all transactions involving non-UK residents, there are plenty of other factors which suggest this will not dampen international demand for property.
These factors include the low value of the pound, low interest rates and a diverse range of opportunities available, not to mention the extension of the Stamp Duty holiday.
For now, the property market is in a strong position.
The 2021 Spring Budget has been positively received and should the transition out of lockdown continue as plan, we are likely to rise in transactional activities across all segments of the real estate market. Should this occur, it ensures the UK is an ideal position to overcome the economic challenges posed by COVID-19.
Alpa Bhakta is the CEO of Butterfield Mortgages Limited, part of the Butterfield Group and a subsidiary of The Bank of N.T. Butterfield & Son Limited. Butterfield Mortgages Limited is a London-based prime property mortgage provider with a particular focus on the needs of UK and international HNWIs.
The opinions expressed herein are those of the author and do not necessarily reflect those of the Butterfield Group.
Butterfield Mortgages Limited is authorised and regulated by the Financial Conduct Authority (Financial Services Register Number: 119274). Registered office: Sun Court, 66-67 Cornhill, London, EC3V 3NB. Registered in England No. 338594.