How the housing market will change post-pandemic

  • Describe some of the challenges of the housing market, post pandemic
  • Identify ways in which providers are helping first time buyers
  • Describe the existence of green mortgages
How the housing market will change post-pandemic
Hollie Adams/Bloomberg

The property boom since the market reopened in May 2020 has been in striking contrast to widespread economic uncertainty.

March – the month the stamp duty holiday was initially set to end – saw 180,690 sales, according to HM Revenue & Customs, the highest number since modern records began more than 15 years ago. Annual house price growth to February was 8.6 per cent: a seven-year high.

At the same time, analysts say the wider economy was in a “deep freeze”, contracting by 2.4 per cent in the first quarter of the year. 

With the extension of stamp duty relief announced by chancellor Rishi Sunak in the Budget, that furious growth could continue. The holiday is now set to continue until the end of June 2021, tapering off until the end of September. 

This is likely to make for a few busy months, so agents and solicitors will need to work hard to get these deals over the line. It could also fuel yet further price increases: one estate agent’s analysis estimates that average prices in England could be pushed up by a further £23,000 before the end of the year to more than £291,000. In the South East, the increase could be closer to £30,000.

Preparing for the new normal

Such rapid growth would, to an extent, be self-limiting, given the increasing difficulty faced by first-time buyers.

They are now paying up to £73,000 more than last May to get onto the housing ladder, according to research from BuildScan, which offers snagging services for new builds. Even the average first-time buyer in England has faced finding an extra £14,675, taking the average first price to £221,743.

However, there are two factors that support further growth. 

First is that lockdown has, if anything, fuelled already traditionally high demand in the UK for homeownership and in some cases a greater ability to save. New figures show that 80 per cent of private renters are now saving for a deposit. 

Second, newly launched government-backed mortgages offer help for those struggling to raise sufficient deposits. Announced at the Budget, the scheme sees the government underwrite the portion of mortgages over 80 per cent, up to 95 per cent.

It is also available for purchases of up to £600,000 by both first-time buyers and previous homeowners. Several High Street lenders have already launched products under the scheme and many others have launched a 95 per cent mortgage independently of it.

The latest Moneyfacts data suggests in the week surrounding the launch of the scheme, the number of 95 per cent mortgages available on the market jumped by 29 to 34.

It joins other existing schemes such as Help-to-Buy, Shared Ownership and the First Homes Scheme in helping sustain the market, particularly among first-time buyers.

Eventually, though, we can expect the market to slow. The tapering and then removal of the stamp duty holiday will mean less frantic activity.

As we move to the latter half of the year, attention is likely to shift to remortgaging as borrowers look to lock in low interest rates. Advisers will also start to look to the future and a post-pandemic normal.