Paresh Raja, CEO of Market Financial Solutions, explains why he is in a positive mood about the future prospects for bricks and mortar investment in the UK
It looks as though the 2021 Spring Budget has kicked the property market back into gear. After last year’s impressive performance of record-breaking house price growth and rising transactions, there were concerns that buyer and seller momentum would slowly subside in the opening months of 2021.
Initially, this did look as though it was proving to be the case. Nationwide and Halifax both recorded a 0.3% drop in monthly house price growth in January 2021. While the annual rate of growth was still above 5%, some commentators saw this as an early indication of a cooling property market. On top of this, the Stamp Duty Land Tax (SDLT) holiday, which had been the catalyst for house price, growth was due to come to an end on 31 March.
With this in mind, the Chancellor’s decision to extend the SDLT holiday until the end of June has been extremely well-received by the wider property sector. In a bid to encourage investment activity, the Chancellor’s speech on 3 March 20201 made it clear that the property market is a key pillar that will help bring about the economic recovery of the UK, as the country transitions out of lockdown. What’s more, the decision to freeze the income tax and capital gains tax thresholds for the next five years ensures that prospective buyers are better positioned to plan their long-term property investment strategies, be it expanding, consolidating or reducing their total real estate holdings.
On the day of the Spring Budget, Rightmove recorded a record nine million visits to its site. What’s more, house price projection figures have been revised. For example, Capital Economics now anticipates that house prices are set to grow by around 3% this year – a shift from its initial projection of a 5% drop. Savills has also revised its forecasts and anticipates a 4% rise in average house prices by the close of 2021.
These projections will always be modest figures. Nonetheless, if buyer momentum remains strong, these figures could once again be revised. For now, I am interested to see what the house price indexes for March will reveal. If the rate of house price growth continues to rise, it means the UK property market will once again be in a strong position.
Finally, we should not forget that one of the trends holding the property market back in recent years was the uncertainty surrounding Brexit. Given what we now know about the UK’s future relationship with the EU, we could see a surge in international investment, as buyers look to take advantage of the country’s real estate market.
Overall, there are good reasons to be positive about the future prospects of bricks and mortar. The 2021 Spring Budget has unlocked a new wave of investment activity, which bodes well for buyers, sellers, agencies and lenders.
Paresh Raja is CEO of Market Financial Solutions