Property market still booming but trouble ahead

Britain’s property market is continuing to boom with house prices rising by 4.7% in September, but experts are agreed there is trouble ahead as redundancies start to rise once the furlough extension to March comes to an end.

Data from the Royal Institution of Chartered Surveyors (RICS) has shown that buyer inquiries, agreed sales and instructions to sell are all rising fast, continuing the boom which started with the end of the first lockdown.


The report said the growth is expected to continue to the end of the year as people look to relocate, but warned the current rate of growth is ‘unsustainable’, particularly with the government’s withdrawal of stamp duty relief for houses under £500,000 ends next April.

The report said RICS members were confident that the rise in activity would continue for the nest three months with the number of new properties for sale continuing to rise for the fifth month in a row.


It added: “As current guidelines permit the market to stay open during the second lockdown, respondents expect the latest upturn in sales to continue for the rest of the year.

“However, moving into next year, the outlook for sales remains subdued, as respondents cite the withdrawal of government support measures and a difficult economic backdrop as a concern further ahead.”


A Bank Of England projection for a rise in unemployment to nearly 8% in 2021 is expected to produce a downturn in the market with analysts warning house prices could fall by as much as 5% between now and the middle of next year.

Institution economist Simon Rubinsohn said: “There is understandably more caution about activity looking beyond the first quarter of 2021.

Aside from the withdrawal of governments incentives, the market may also find the more challenging employment picture a significant obstacle even with interest rates set to remain close to zero for some time to come.”

Priced out

A separate report from mortgage broker Trussle has highlighted a split in the market with 7 in 10 for potential first-time buyers being priced out of the market as the number of high loan-to-value mortgages has been drastically reduced at the same time as market prices have risen.

Despite being able to raise a deposit to buy their first home first-timers 62% of them have decided to wait until next year at the earliest to make their purchase.


Trussle believe that approximately £5 billion is now held up in deposits as buyers wait to see how the economy changes in 2021.

Spokesman Miles Robinson said: “While it’s encouraging to see the property market remaining open for business with viewings and valuations remaining in place during the second lockdown, it’s disappointing that first-time buyers are struggling to navigate the market.


“The financial impact of the pandemic has meant that lenders are pulling a number of high loan-to-value mortgages.

“As of this week, there are only 74 mortgage deals available for mortgage applicants with a loan-to-value over 90 per cent.

By comparison, this time last year there were over 2,000.”


Brian Murphy of the Mortgage Advice Bureau commented: “In the current climate, a mortgage application can take anywhere up to 10 weeks to reach the mortgage offer stage.

An unstable employment market, greater scrutiny over affordability checks, and disruptions to lenders’ ordinary operational capacities each contribute to slowing down the overall mortgage process.

“The stamp duty holiday represents savings in the thousands of pounds for most buyers so if a transaction is suddenly delayed beyond the deadline, this could significantly impact cashflow if buyers have banked on not paying stamp duty.”