CAN THIS BOUYANT MARKET CONTINUE?

Until recently, optimism in the recovery of the residential property market has prevailed and has been driven by a shortage of attractive properties, but can this be sustained?

Already the supply of such properties coming onto the market is reducing, which in the short term is stoking inflation. However, there are certain events on the horizon, which may have a moderating effect.

Firstly, the Stamp Duty (SDLT in Wales) ‘holiday’ is coming to an end on the 30th June and it is almost certainly too late already, to be buying in time to take advantage of this.

Secondly, furlough will also be ending in September and the crunch will come when businesses will have to decide whether to pay full wages, make redundancies or close the concern, as no longer being a viable entity.

Last week, home.co.uk reported that the supply of houses was now down by a quarter, compared with the same time in 2019.

In ‘normal times’, many owners will only market their properties when they see something they would like to buy and with little available, that further reduces the supply of housing coming onto the market.

As the lockdown ends and levels of uncertainty subside, more may decide to sell and the increasing numbers will reduce the present inflationary pressures.

What makes the continuation of the presently overheated market unlikely, is that whilst property prices are rising, incomes are not. It is unlikely that values will fall, but there should be a levelling out. Property always represents one of the soundest investments, because of Capital Gains Tax benefits (subject to Government consideration of possible tax increases in that), there is always going to be a short supply relative to demand, which is continuing to rise. The availability of low interest finance, mortgages spread over many years and finally ‘just being a home’ it can be fashioned into a lifestyle that suits and this will further add to its value.

In summary, not too long after the end of the Stamp Duty holiday, the house buying public will come to accept the status quo, as it has always been and the signs are promising that much of the economy will recover to acceptable levels. One thing this country is adept at, with the major involvement of the Bank of England, is financial stability.

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