Boom followed by a bust? Housing market pick-up ‘may be short-lived’

The UK housing market could be heading for a boom followed by a bust, according to feedback gathered by surveyors.

The Royal Institution of Chartered Surveyors (Rics) said anecdotal evidence suggests that the temporary stamp duty holiday introduced from July 8 in England and Wales is playing a significant role in lifting demand.

The stamp duty threshold for homes has been temporarily raised to £500,000, saving some buyers as much as £15,000, but the threshold will be lowered back to £125,000 from April 1 2021.

But Rics’ July survey of property professionals found that the recent impetus seen in the housing market is not expected to continue as wider government support measures are gradually phased out later in the year.

It said some contributors are “even referencing the possibility of a boom followed by a bust”.

Rics chief economist Simon Rubinsohn said: “It is interesting that there remains rather more caution about the medium-term outlook, with the macro environment, job losses and the ending or tapering of government support measures for the sector expected to take their toll.

“Significantly, some contributors are now even referencing the possibility of a boom followed by a bust.”

Homes with gardens
Homes with gardens

A separate report from Halifax last week found that average UK house prices hit a new record high of £241,604 in July.

But on Wednesday this week, the scale of the economic fallout from the coronavirus crisis was thrown into sharp relief, as the Office for National Statistics (ONS) confirmed that the UK has nosedived into recession for the first time since the financial crisis.

Rics’ survey found that house prices lifted in July in most parts of the UK, with London being the exception as values there were reported as continuing to fall.

It also said that an overall net balance of 75% of professionals noticed an increase rather than a decrease in the number of home-buyers during the month.

It marked the second month in a row of buyer demand rebounding firmly, after the housing market was put on pause earlier this year as part of measures to limit the spread of coronavirus.

A net balance of 59% of professionals also reported an increase rather than a decrease in sellers bringing homes to market, following an increase in June.

Alongside the rise in buyers and sellers, an overall balance of 57% of professionals saw an uplift in house sales across the UK.

The strong pick-up in transactions followed some hefty declines earlier this year.

Looking ahead, surveyors expect sales to continue to pick up over the next three months.

But in a year’s time, surveyors foresee sales tailing off, the report said, amid concerns about the prospects for the UK economy and the impact this will have on employment as the furlough scheme expires.

The outlook for house prices in a year’s time is “marginally positive”, the report said.

Mr Rubinsohn added: “One of the other notable aspects of the survey is the feedback that there is a greater interest in properties that offer some features that help better manage future lockdowns, whether it is access to green spaces, gardens or balconies.”