After 18 months in a pandemic, and with property prices surging, you might be wondering if now is a good time to buy a house.
There’s been a rush for everyone to complete their purchases before the stamp duty holiday – meaning no tax on the first £500,000 of properties – winds down. From June 30, the threshold dropped to £250,000 until September 30. And stamp duty thresholds will return to normal levels from October 1.
Annual house price growth accelerated to 13.4% in June, marking the strongest growth since November 2004, according to the Nationwide Building Society. Across the UK, the average house price in June was £245,432, and prices were up by 0.7% month-on-month, following a 1.7% increase in May.
Zoopla data also shows house prices have increased 4.7% over the past year, equating to an average uplift of £10,000 per property in the UK.
So what does all this mean if you’re looking to buy a property in the second half of 2021? We asked property and money experts.
What does the wind-down of the stamp duty holiday mean for the property market?
Robert Gardner, Nationwide’s chief economist, predicted: “Underlying demand [for properties] is likely to soften around the turn of the year if unemployment rises as most analysts expect, as government support schemes wind down.
“But even this is far from assured. Even if the labour market does weaken, there is also scope for shifts in housing preferences as a result of the pandemic to continue to support activity for some time yet.”
Gardner’s right. Just because the stamp duty holiday is being phased out, it doesn’t mean the demand to move has vanished. Especially as more people are finding out they’ll be able to work from home long-term – a move away from cities is more appealing without the commute five days a week.
Tom Bill, head of UK residential research at Knight Frank, believes the end of the stamp duty holiday is a good thing for the property market, as it actually put some people off buying. “A tax deadline there is no guarantee of meeting, together with stories of sealed bids, over-worked conveyancing solicitors and a shortage of removals vans will have deterred some – exacerbating already-low levels of supply and putting upwards pressure on prices,” he says.
“Indeed, the second half of this year should see healthy levels of activity in the UK housing market. There is frustrated demand in the system, new supply is starting to pick up and the labour market is stronger than most economists predicted six months ago.”
So, is now a good time to buy a house?
“More balance between supply and demand should return in the second half of the year,” Bill tells HuffPost UK. There will be more choice, he says, as more sellers list their properties as the stamp duty holiday winds down, “which will put downwards pressure on prices”.
“It will be a market where tax deadlines do not play a significant role and more seasonality and predictability will return,” he adds. But bear in mind spring and autumn are normally the busiest times of the year for home buying.
Grainne Gilmore, head of research at Zoopla, says there’s definitely still buyer demand, “driven by a ‘reassessment of home’ among many movers looking for more inside or outside space or to live in a different location,” she says.
“The market is particularly buoyant at the moment,” she adds. “We’re hearing from our estate agents that vendors are favouring buyers whose property is already under offer – or buyers who have no chain at all.”
Jo Thornhill, mortgages expert at MoneySuperMarket, said there could be some downsides to jumping “straight into a hot market” as she puts it.
“You may want to consider biding your time rather than rushing into purchases.”
“Firstly, if you’re actively looking then you’re racing against time as the tax break comes to an end in September,” she says. “Another factor to consider is that house prices which are priced too highly could cause short term trouble. This is because when the rush dies down, you may discover that your property is worth less than what you originally paid for it.
“With these points in mind, you may want to consider biding your time rather than rushing into purchases. But, if you do choose to make the move then make sure you’re acting with the bigger financial picture in mind.”
Ultimately, says Thornhill, the best time to buy is when you can afford to and when your finances are in the best shape – having little debt and a good credit score helps. “Consumers who are looking to borrow should explore all loan options and take advantage of any low-interest loans on the market,” she says. “Now is a good time to buy as interest rates are at historic lows so it would be wise to take advantage of this, whilst you can.”
As Gilmore adds, in peak periods, there’s likely to be more for sale but stiffer competition; and in quieter periods, there might be less for sale but competition might be more relaxed. “Most buyers and movers will make a decision to purchase based on their personal circumstances and needs, while investors are more driven by localised market conditions,” she says.
When you’re ready to start looking, you can use MoneySuperMarket’s mortgage comparison tool to compare deals and which might be the best fit for you.