How will the UK’s recession affect my home value?
The UK economy is officially in recession for the first time since 2009. Certain sectors have felt the pinch much more than others, so where do we stand now in the housing market? Will your home value be affected?
Last week, the Office for National Statistics (ONS) revealed that the UK has experienced two consecutive quarters of economic decline. This technically puts the UK economy into its first recession in 11 years, when the global financial crisis took its toll.
The figures show that the economy contracted by 20.4% between April and June as the effects of coronavirus became apparent. The services sector, retail and hospitality have suffered in particular as shops, hotels, restaurants and schools all closed.
However, the ONS also revealed that there were already signs of recovery in June, with 8.7% growth. Since March, the government has implemented a range of measures in an effort to boost the economy. Chancellor Rishi Sunak has indicated there will be more in the pipeline in autumn.
How will the housing market be affected?
The last recession, sparked by the global financial crisis of 2007-2009, was quite different to the current one. The housing market, shares and investments took a big hit in the crash 11 years ago. It’s key to know that this recession was caused by a medical pandemic, NOT a financial crash, so the outcome is not going to mirror what happened back then.
While any economic uncertainty will affect the property outlook, so far house prices and forecasts have remained buoyant. Average asking prices are £30,000 higher today than they were before the lockdown and have gone up by £10,000 since the chancellor cut stamp duty in England and Northern Ireland on July 8th.
Transactions have rebounded dramatically since the property market was put into lockdown for almost seven weeks. Pent-up demand, coupled with a desire by some to change their lives post-quarantine — whether that is by divorce, marriage or relocation — is being turbocharged by the chancellor’s stamp duty holiday.
One major factor in the housing market’s favour is the state of the sector pre-coronavirus. Thanks in part to the “Boris bounce“, the end of 2019 and beginning of 2020 showed good growth in the sector. Property is an asset that people will always need, whether buying or renting, and it is thought that this will stand it in good stead for recovery.
Stimulating the market
Last month, Chancellor Rishi Sunak made a major change to the stamp duty threshold. All residential properties worth up to £500,000 are now exempt from the tax. This could save homebuyers as much as £15,000 on their purchase, and the scheme is set to run until next spring.
The stamp duty holiday has already proved extremely successful in stimulating the market, as buyer enquiries have increased significantly.
In the latest house price index from Halifax, house prices increased by 1.6% from June to July. This represents an annual change of +3.8% from 2019, showing the start of a “mini-boom” in the market.
According to Halifax managing director Russell Galley, the government’s stamp duty cut has supported the post-lockdown spike. He says that confidence is currently growing and the future looks “brighter than expected”.
The current low interest rate environment also means now is a good time to borrow for property. While savers may be seeing extremely poor outcomes from their accounts, those taking out new mortgages or remortgaging now are securing very low rates and competitive deals.
How do I take advantage?
It’s never been a better time to get your property on the market, with the abundance of buyers looking to save on stamp duty and the summer/autumn months promising fantastic photos and video tours. Get in touch if you want to know more about the current market or take your first step towards your move by getting a home valuation.