A race for space is driving the fastest rise in house prices for seven years but this is a property boom unlike many others.
You have to love the UK property market. Even when faced with a pandemic which lays waste to the rest of the economy, it finds a way to prosper. While many predicted doom and gloom the last 12 months have been some of the most profitable in history.
The trend was recently confirmed with data from Nationwide showing prices leapt 10.9% to a staggering £242,832 – the largest jump in seven years. Much of that comes down to the recently extended Stamp duty holiday which sees property buyers only paying a rate of 3% on purchases up to £500,000.
The holiday was originally slated to end at the end of March, but Chancellor Rishi Sunak decided to extend it until June 30th after which the reduced rate will apply on purchases up to £250,000 will apply to the end of September. From then on – further extensions not withstanding – the old system will apply.
There is no doubting the impact the stamp duty holiday had. A policy designed to support the housing market through a difficult time actually saw it surge during the second half of 2020.
However, according to this survey from Nationwide, that’s not the key factor driving growth. According to its findings, most people would still be considering buying property even without the tax break.
Instead, this housing boom is down to a growing demand for something even more important than a tax cut – space.
The pandemic did a great deal to change our perception about a great many things. One of those was our obsession with city living. For months, people in small urban dwellings found themselves locked down in tiny flats without a garden. Meanwhile, people out in the countryside could enjoy the sunshine and pop out for exercise in miles of green spaces.
People in London and other cities looked on and thought – ‘we want some of that’.
At the same time, the pandemic dramatically accelerated the demand for remote working. Businesses and employees discovered it was easier than they ever imagined to work away from the office. According to various studies, most people want to continue even after the pandemic. Hybrid working – in which most people work at least part of the week from home – is expected to become the norm.
At a stroke, therefore, one of the biggest ties keeping people in cities (their work) was loosened. With many others opting to go the whole hog and going freelance people have become more footloose.
The proof of the pudding has shone through in a somewhat uneven distribution of price rises. In London house prices have seen their biggest fall for ten years. Meanwhile, in more remote spots such as Cornwall prices have surged.
We are, then, experiencing a new kind of Gold Rush – this time for green space and open air. Priorities are changing and people want different things. This – as much as government support – is putting the UK housing market in a buoyant, if somewhat unusual, place.