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Pandemic drives prime property price surge

Research highlights ‘hot’ property market

02 June 2021

3 minute read

While the pandemic has certainly caused widespread disruption to businesses across the UK, it has proved something of a boon for some parts of the UK property market.

Pandemic drives prime property price surge

Prime country property prices have surged over the first quarter of 2021 hitting their highest levels since before the 2007-08 financial crisis, according to research from estate agency, Knight Frank. This has been accompanied by an 85% jump in the number of exchanges on properties valued between £5m to £10m in the regions in the year to March compared to a year earlier.

Supply and demand

Constrained supply appears to be a key driver of the surge with average prices increasing 7.3% in the first quarter for properties valued at £5m and above, taking the annual rate of growth to 15.8%, according to the data. Meanwhile, prime country homes outside London lifted by 6.7% in the year to March 2021.

Demand appears to be driven by buyers seeking more space, greenery and privacy post-pandemic. This wish list has been led, in part, by an expectation that there will be more of a move towards home or hybrid (a blend of office and home-based) working when lockdown restrictions are removed in June.

The report highlights the fact that price growth for higher value properties has been weaker than the wider market in recent years which has been due to a series of tax changes, leaving greater scope for price rises. While house prices in England and Wales grew 32% in the five years to February 2021, homes in the £5m-plus range increased by just 6% over the same period. However, supply in the high-end bracket has tightened over recent months driving up prices in this segment.

Not just prime

However, it’s not just prime country properties feeling the heat. Fear of missing out appears to have also been a contributing factor in the lower-priced segments of the market while the stamp duty holiday has continued to feed the frenzy.

Buyers remain fearful that they could miss out if they don’t hurry up and buy before prices move out of reach. Meanwhile, the stamp duty holiday continues to add stimulus to an already active market, increasing the current shortage of available homes as buyers aim to take advantage of the current suspension of the property purchase tax.

However, while the influence of the stamp duty holiday is expected to fade gradually over the coming months as it is tapered out, low stock levels, low interest rates, and continued demand is likely to continue to underpin prices in the market.

The future

The challenges of home-schooling children and concerns over new coronavirus (COVID-19) variants has led to pent-up supply as sellers held off putting their properties on the market during the third national lockdown. However, it is expected that supply may start to increase in coming weeks as more properties come on the market in line with the usual pick-up in the housing market in the spring. Meanwhile, market valuations remain high and are expected to continue to climb further.

Liam Boardman, Mortgage Specialist at Barclays, says: “The Stamp Duty holiday and pent-up demand continue to drive market conditions. It will be interesting to see if this is paving the foundations for continued growth. With the end of the Stamp Duty holiday on the horizon and easing of lockdown restrictions, will this impact the current momentum, time will tell.”

Things to consider

The value of investments can fall as well as rise. You may get back less than what you originally invested.

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