UK Property Market Outlook: Week Beginning 19 April
The end of the furlough scheme is likely to have a limited impact on the UK property market
3 minutes to read
The stars have aligned for the UK property in the second quarter of this year.
The speed of the vaccine roll-out, progressively more positive economic news and the extended stamp duty holiday mean activity reached record levels in March.
Once the stamp duty holiday starts to taper from June, we believe the impact on the market will be more mild than material, for reasons discussed last week.
After a seasonal lull over the summer that should be more evident this year, autumn also sees the winding down of the government’s furlough scheme.
We shouldn’t downplay the effect of both of these support measures ending and annual housing transaction numbers are likely to be weighted towards the first half of 2021. Furthermore, the broader return to normality will inevitably bring other unforeseen economic frictions.
However, a closer look at the government’s own furlough data suggests there is unlikely to be meaningful downwards pressure on sales volumes or prices in the UK property market when the scheme ends.
The percentage of the eligible workforce on furlough by local authority varied from 9% (Boston) to 26% (South Lakeland) in England and Wales at the end of January, provisional government data shows. The average figure was 15%.
Based on the change in the number of properties marked as under offer between March 2020 and March 2021, higher rates of furlough did not lead to lower levels of housing market activity.
For the 20 local authorities that experienced the largest increase in the number of properties going under offer in the year to March, according to OnTheMarket data, the average rate of furlough was 15%. For the 20 local authorities that experienced the lowest rise in the number of properties under offer, the average furlough rate was 14%.
Further underlining the absence of any link, in the 20 local authorities with the highest average rate of furlough, the average increase in the number of properties going under offer was 30%. For the 20 areas with the lowest rate of furlough, the increase was 26%.
Expectations for unemployment have become more positive in recent months, with the ONS forecasting a figure of 5.6% in 2021, revised down from 6.8%. It now expects unemployment to peak at 5.9% in 2022.
Furthermore, the unemployment rate will still be small by historical standards, says Savvas Savouri, chief economist at Toscafund. “One of the ways the timing of the pandemic was so fortuitous for the UK was that when it began the rate of unemployment was under 4%, a figure labour economists consider real zero.”
He also believes the unique nature of this recession will limit the wider economic fall-out.
“This is not like previous recessions when whole communities were affected by the closure of a steel mill or a coal mine,” he said.
“It’s also completely different from the global financial crisis when the collapse of banks and building societies had a localised impact. Every town and city has hospitality and retail venues and so no particular region will be left behind as the country emerges from this recession. You also have to remember that unique to all other recessions, swathes of the UK economy have been boosted by the very forces that have impaired others.”