UK Property Market Outlook: 12 July 2021
Data from the first week following the end of the full stamp duty holiday suggests the market will quickly regain momentum.
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For those wondering what will happen in the UK property market after the stamp duty holiday ends, the first week of July contained a few clues.
The first and most obvious conclusion to draw is that there has been a pause for breath. This is inevitable as the conveyancing system re-boots following a frenetic period of activity that ended on 30 June.
As a result, Knight Frank exchanges in the UK in the first week of July were just over 40% of the five-year average. In the last week of June, exchanges were up 204% over the same period.
Stamp duty has had a bigger impact on the ebb and flow of property transactions in 2021 than any other year. The maximum tax saving fell to £2,500 from £15,000 from the start of this month, a level at which it will remain until the end of September when the tax-free rate reverts back to £125,000.
Despite the maximum saving falling by £12,500, another clear message is that demand remains strong.
The number of new prospective buyers registering between 1 and 7 July was 31% above the five-year average for the same week. Meanwhile, the number of offers accepted increased by 59% and viewings rose 4%.
Underlining the extent of frustrated demand in the system, the ratio of new prospective buyers to new instructions to sell in the UK was 10.4 in June, which was 56% above the five-year average. Buyers registering in June would have had little prospect of completing by the end of the month.
As well as frustrated buyers, there is another group who have remained on the sidelines, deterred until now by the frenetic pace of activity caused by the stamp duty holiday. Hesitation on the part of buyers and sellers is one reason the holiday ultimately overstayed its welcome.
A third group - international buyers – could also start marking their presence felt in the third quarter of this year should travel restrictions continue easing.
However, the problem facing the housing market in 2021, and the reason for such strong price growth, is a lack of supply. It was highlighted again last week in the latest RICS UK residential market survey.
Recognising the strength of demand despite the end of the SDLT holiday may persuade more prospective sellers to list their property, returning more balance to the market.
Should this happen, it will break the vicious cycle of low supply that has affected some UK locations more than others. In has meant, for example, that some sellers looking to move from London to the countryside have had to put their move on hold due to a lack of purchase options.
There are early signs that supply will pick up, although this may only fully materialise after the summer. The number of market valuation appraisals in the first week of July was 3% above the five-year average. In London, the figure was down 1% but in the Country, where supply has been tightest, the rise was 6%. Market appraisals take place when an owner wants to value their property for sale and therefore act as a leading indicator of supply.
“Stock is still low but building,” said James Cleland, head of Knight Frank’s Country business. “There will be a gradual restocking over July and August and good houses will sell well over the summer. It actually feels like we’re moving towards a better place as a rebalancing of the market is underway.”