Autumn OBR report indicates challenges but offers glimmers of positivity in UK property.
The latest Office for Budget Responsibility report reveals a bumpy economic road ahead but there are reasons to remain optimistic in the property market.
After a turbulent start to this year, the housing market has since rebounded strongly thanks to the installation of certain government measures and the relaxation of others. The efforts have triggered a surge in property prices over recent months with the North West region hitting a stunning 16-year high.
Residential property transactions also took an initial slump when the pandemic struck but bounced back swiftly thanks to the government easing a parade of restrictions that were previously constricting activity within the market. A Stamp Duty Holiday was then introduced and very quickly became a catalyst in kickstarting the housing market.
Despite the positive effect that the Stamp Duty Holiday has had on the number of property transactions there have been several reports to suggest that the government measure has created bottlenecks in the market, caused by staff shortages and reduced capacities in the mortgage, removal and conveyances sectors. A stampede to buy houses before the government initiative ends next year has had a profound effect on the number of mortgage approvals which hit its highest level in October for over 12 years.
“This ongoing activity means that the processing log-jam continues to pile up because of the sheer number of homebuyers trying to reach the finish line by the end of March,” said Rightmove’s Director of Property Data – Tim Bannister.
However, despite these blockages, the government’s Autumn OBR report has forecasted that transactions will continue to rise until the end of Q1 next year when Stamp Duty Holiday is currently planned to end. Although a drop off will be inevitable, the government has forecasted a gradual rise shortly after Q2 back to a level consistent with longer-term average rates of housing market turnover. This positive forecast will no doubt be partly due to the anticipation of an imminent vaccination rollout.
Many of our readers are investors in property-backed peer-to-peer loans and the news of the vaccination rollout schedule should provide great hope to the swift return of normality within the housing market. The Autumn OBR report does indicate short-term challenges to both house prices and transactions in this sector, but we should remember that investing with a short-term mindset rarely bodes well. There are bumps in the road, but the long-term outlook is looking increasingly positive.