The property market needs continued government support if it is to sustain growth in 2021 according to a leading property firm. Apropos by DJ Alexander, a UK-wide letting firm, believes that the property market – from homebuyers to tenants, to landlords and investors – has had a stronger period of growth since March 2020 than many would have expected or even hoped for.
The financial support the government has provided through the Stamp Duty Land Tax (SDLT) threshold extension has encouraged investors to buy, individuals to move despite uncertainties caused by the pandemic, and tenants to seek greater security in their homes all of which has resulted in sustained growth in the homebuying, investing, and private rental markets.
However, with the SDLT threshold extension about to end in March, and projected large scale increases in unemployment there is a serious risk of the market hitting a financial cliff edge which could result in a sudden fall in property values. If this is coupled with a dramatic increase in capital gains tax (CGT) on second homes and investment properties, then much of the recent growth in the market could quickly become dissipated in a short period.
David Alexander, the joint chief executive officer of apropos by DJ Alexander, commented:
“The fast-growing property market has been one of the surprises of the pandemic with few predicting that it would be so buoyant over such a prolonged period. The SDLT threshold extension undoubtedly contributed to this boom along with buyers changed priorities and shifting housing demands initiated by owners and tenants’ reactions to the lockdown.”
“The resultant boom has led to substantial increases in average house prices over the last seven to eight months which shows little sign of abating unless the market hits a brick wall at the end of March. It would be a shame, and potentially damaging to the economy, if the gains of the last year were simply lost through a sudden ending of the stamp duty extension. The most sensible and balanced approach would be to continue the threshold extension and phase it out over six months to a year to ensure there is no sudden collapse in the Spring. In this way we could ensure some continuity and stability in the property market at a time when many may feel that there is very little certainty in employment, finances, or the wider economy.”
David continued:
“Along with increasing house prices there has been considerable growth in the private rented sector which has also experienced something of a boom. Tenants have wanted to move to their ideal property with more outdoor space choosing places suitable for working from home. The result has been greater demand, higher rents, and popular areas showing signs of serious growth.”
David added:
“Whether this growth in the private rented sector is sustainable in the long term is debatable. Although the Prime Minister has secured a Brexit deal it remains to be seen how this will impact on the many thousands of EU citizens who live in the UK, many of whom live in the private rented sector. Any sudden reduction in their numbers could see a sudden glut of properties resulting in reduced rentals in the short term.”
“However, this could be countered by a shortage of long-term properties if the holiday lettings market recovers. With predictions of an opening up of the UK market as early as February or March due to widespread vaccination there is likely to be an enormous increase in demand for staycation holidays this year. Many people may not be quite as keen on travel abroad if other countries vaccination programmes are less advanced than this country, so demand for UK-based holiday options are likely to be strong. If this is the case, then we could see a return of many properties to the short-term holiday lettings market to cash in on sudden demand.”
David concluded:
“There is much to be optimistic about in the coming year but there is also a balancing act to be struck by the Government to ensure that the gains the property market has made in recent months are not simply dissipated in a loss of momentum in the market and unfair and unprecedented property tax hikes in the Budget. Keeping things simple, ensuring property remains attractive and affordable to individuals, investors, landlords and tenants is the key to maintaining a stable and balanced economy ready for any uptick in activity which might occur in the coming 12 months.”
