R.The latest headlines announcing a housing boom look set to continue on Monday, as Halifax unveils its latest monthly price report. The numbers were generally ahead of rival Nationwide and may even show annual price growth of nearly double digits. In October prices were 7.5% higher than a year earlier.
Even if the growth rate hasn’t picked up, we’re a long way from anyone’s expectations for 2020. Last year, Halifax predicted price hikes between 1% and 3%, and other lenders and brokers roughly agreed. And when the housing market closed in the spring, it would have been a brave commentator to suggest prices would end the year at a higher level.
But the freezing of the housing market in May created a urge to buy. “We saw people who wanted to get on with life, people who wanted more space, a garden or a home office,” said Neal Hudson, housing market analyst at BuiltPlace consultancy. “We are starting to see that summer boom and all the deals that have been made during that period in the data. We will really see transaction data rising in the coming months, and house price inflation is likely to remain high.
“These are people who have not been affected by the pandemic. Their finances are good – maybe even better – and they have a large investment or equity capital, so they are in a good position despite the conditions in the mortgage market. The icing on the cake was the stamp holiday. “
The rush to overcome the end of that tax break, which expires in late March, has crystallized many people’s plans and brought forward transactions. HMRC reported that 105,000 homes changed hands in September, and Hudson said he expected the data to show between 120,000 and 130,000 deals completed in the coming months.
But we’re already at the point where, for people who take out a mortgage and join a chain of buyers and sellers, the clock is running on the stamp duty holiday. There have been calls for it to be renewed, but Hudson said that would only slow down the crash of transactions that will occur once it ends.
How that translates into prices is unclear. The OBR has suggested there could be an 8% drop next year as the tax break ends and household finances deteriorate. And Hudson pointed out that the spring of 2021 will put more downward pressure on prices. The Help-to-Buy plan is only available to new buyers from April; a new surcharge for foreign buyers is planned for the same month; and the leave scheme is coming to an end. Before that, there is also the small question of the end of the Brexit transition period.
In recent days, however, banks and building societies have started offering 90% home loans and easing restrictions – starting December 8, Nationwide will offer 90% deals to movers and startups, lifting the ban on fully donated deposits. This suggests that lenders are not afraid of a crash. And if they continue to support struggling borrowers, as they did after the latest recession, they should be able to avoid the foreclosures that have led to collapses before.
More organizations will come up with their predictions for 2021 in the coming weeks. Expect a lot of caveats and don’t count on them going well.