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The UK Property Boom: Insight & Property Predictions

July 7, 2021

Despite the unprecedented challenges of a global pandemic, property prices in the UK have continued to rise fairly sharply and the housing market has remained active and buoyant. And with little sign of any significant slowing, many are wondering what’s next and how long the UK property boom can continue.

The reasons behind the UK property boom

Since we emerged from the market freeze of May 2020, demands have soared and inventories have struggled to keep up, placing a good deal of upward pressure on property prices across the country.

The lockdown conditions of the pandemic presented an opportunity for so many Brits to reassess their living situations, sparking a desire for change. Between working and schooling from home, hundreds of thousands of people across the country have been seeking to improve their living situations, hungry for added space, an extra bedroom and outdoor areas.

Additionally, the social, cultural and vocational draw cards that city centres have held for centuries suddenly all but disappeared, causing metro residents in their droves to relocate to suburban areas with more space. As remote-working became the new normal and little else remained to keep residents in cities, the pull towards larger housing with gardens saw many make considerable lifestyle-changing moves, with areas of the South-East and Wales proving particularly popular.

Then there are the government incentives - with the Stamp Duty Holiday, the Help-To-Buy schemes and consistently low interest rates making such desires to move a realistically affordable option.

London’s own property boom is gathering pace

Despite the mini exodus that city centres endured mid-pandemic, now lockdowns have lifted tenants are returning to central London locations. As entertainment venues and business hubs reopen their doors, the lure of London living has seen the average price of a London home exceed £500,000 for the first time, with prices rising by 7.3% year-on-year in the second quarter of 2021. Over a three month period, the average home value went from a little over £480,000 to just shy of £510,000.

The market is also witnessing the - albeit gradual - return of overseas investors. With continued travel restrictions, they are currently only trickling back, but leading international investor countries, such as Hong Kong, are starting to return to the market and this activity will only increase as restrictions are further eased.

No significant market cooling in sight

If the reaction to the last intended end to the Stamp Duty Holiday (SDH) is any indication, it will only have a surprisingly marginal effect on the market. When the initially proposed end date for the holiday was in place for 31 March 2021, significant market activity continued through January and February, with the majority of buyers reporting that they would continue to progress with their purchases even if they missed the deadline for the Stamp Duty savings.

Though Stamp duty rates changed from 1 July, first-time buyers will continue to be incentivised to enter the market, with transitional savings still available for purchases up to £300,000 until the end of September.

The following table shows stamp duty rates for first-time buyers during the stamp duty holiday transition period from 1st July until 30th September:

Additionally, while interest rates are historically low, they have been so for a long time now. The banks are giving no indications of any impending changes, leaving buyers that still have a lingering urge to change up their home environments with the confidence to do so.

That said, there are some signs of a slight cooling to market activity. The number of sales agreed upon was up by approximately 45% in April 2021 compared to the year before, but May 2021 only saw a 17% increase year-on-year. These stabilising signs may indicate that the market will slowly start to simmer, however, continuing strong demands and relatively low inventories will likely see price imbalances remain a factor for the rest of 2021.

There has been a sizable 40% increase in new London property listings of late, however, which will help to meet the consistently high demands and should prevent London prices from soaring much further.

The much-anticipated arrival of the Crossrail is also bolstering London borough markets, with properties near stations set to benefit seeing significant demand. Our guide to the Best Rental Yields in London for Quarter 2 breaks down all of the hottest investment opportunities in the capital, with areas of east London currently achieving the highest overall rental yields. You can also read our guide to Where To Buy Property in London in 2021.

Related: Summer London Property Market Update

How to price and what to offer

When it comes to discerning the overall heat of a housing market, discounting - the difference averagely between asking and eventual selling prices - is a key factor to consider. In a red hot market, for example, this difference is minimal as so many buyers are ready and willing to throw lots of money at properties to secure them fast.

Recent data is demonstrating that the London market itself is a little more tepid in this regard. Research shows that the current average discounts occurring are sitting between 19.4% and 23.5%.

Despite what is clearly a seller’s market, with less homes available for sale than the volume of prospective buyers shopping, vendors must still be realistic about property values. It’s imperative, particularly in such a market, that you check what prices similar properties nearby have actually sold for. When it comes to selling, resist the urge to be too easily seduced by some agent’s attractively high property valuations because, although confidence in consumers is currently high, buyers are still inevitably price sensitive.

You can get a quick indication on your current property value with our online property valuation tool, or give us a call on 020 7099 4000 if you’d like one of our Managers to pop over and give you an accurate valuation in person.!!!!!

For homebuyers, this also means that rather than being guided solely by asking prices, it’s important to do your due diligence. Before making an offer, do your research to ensure that you are not about to significantly overpay - but don’t dawdle. Competition in a seller’s market is fierce and while you want to make a sensible offer, you need to move quickly and make it a competitive one to stand a chance. It is almost always worth making an offer just below the asking price, but make it ridiculously low and you will likely just annoy all involved.

How to find value in the current market

Aside from being a savvy buyer regarding doing your research and not simply being guided by asking prices, there are other ways to still find a great deal in the current market.

One of the surest ways to grab a bargain in the current climate is to go against the tide and shop in the property categories that are struggling. Right now, properties without gardens or any outdoor space are on struggle street thanks to Covid. Flats in particular are currently available at below market values as the pandemic pushed gardens and outdoor space to the top of buyers’ wishlists.

With a sizeable chunk of equity at your disposal, you could even score a prime London address if you move quickly. Some areas of central London that usually attract overseas investors have quietened off sufficiently enough to create some attractive opportunities for those able and willing to buy. There are some top regeneration areas in London also worth considering.

What’s next for the housing market?

With the Stamp Duty Holiday finished and the lockdowns lifting, there are a mixture of changes occurring that do make property predictions tricky. On the one hand, the summer months and renewed freedoms will see continued market activity, while there may be some slowing on account of the gradually lessening stamp duty savings.

Current market data suggests that overall, activity will remain high until well into 2022. Many still harbouring the desire to move are enquiring at record levels, and flats - having already represented the greatest growth since January 2021 - will continue to regain some of their popularity as city life is resuscitated.

Get in touch with our property experts for more advice

If you’re looking to invest or buy property in London, sell your London property, or rent a property in London, we can help. Click the links or give us a call on 020 7099 4000 to find out more.

You can also get a free online property valuation in 60 seconds through our online form, or check out our online rent calculator.

We already know how much your rental property is worth. Type your postcode to find out and get an online valuation within 60 seconds.

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