With early Spring sunshine beginning to seep through, Lockdown 3 measures starting to be eased, and the recent Budget likely to unearth a number of opportunities within the housing and mortgage markets, I can’t help feel all stakeholders are about to benefit from an increasingly positive environment throughout the rest of 2021 and beyond.
There is no doubting that opening up the stamp duty holiday last year to landlord purchasers, as well as owner-occupiers, provided a significant boost for our sector, and the decision to extend the holiday until the end of June, followed by a three-month taper, will also help those who may not have got their completion over the line before the end of March.
While landlords will not have purchased simply because of the stamp duty saving, they will undoubtedly have taken it into account, and the recent statistics from UK Finance on 2020 as a whole, and the last quarter of the year particularly, appear to highlight just how landlords were unlikely to look a stamp duty gift horse in the mouth.
The figures show that Q4 2020 saw the highest landlord purchase activity statistics since Q1 2016. It will not take a genius to work out that the first three months of that year were just prior to the introduction of the 3% stamp duty surcharge for landlords (and additional homeowners) and therefore it’s understandable that landlords would similarly want to make the most of the current savings now, perhaps bringing forward purchases that they might have planned for further in the future.
Overall, and again this is understandable given the two-month closure of the housing market back in March through May, the number of buy-to-let purchase loans during 2020 was down by just over 10% on the year previously. 64,500 purchase completions occurred during 2020, compared to 72,300 in 2019, however we all anticipate a very strong number of completions particularly during the first three months of this year, and indeed now all the way up to the end of September.
Indeed, there is also nothing to suggest we’ll see a significant drop off even after the final stamp duty holiday deadline date is passed, because property as an investment retains its allure, the demand from tenants remains strong, and given the Budget announcements and the landscape, there is now an expectation that house prices will not suffer unduly, even after the furlough scheme, for example, comes to an end.
Capital Economics – following the Budget – issued its new assessment of the UK housing market environment, and moved its position to one where it does not anticipate house prices falling at the tail-end of 2021, because the ‘prolonged reduction in stamp duty, a new mortgage guarantee scheme, and an extension to the furlough scheme should sustain high transaction volumes and prices throughout most of the year’.
It acknowledges that Q4 may present some challenges if the changes are enough to cause a rise in unemployment and mortgage arrears, but its view is that it will not be enough to impact negatively on prices.
Of course, there’s also the positive news to be taken from the ongoing easing of lockdown – as I write this, children have today gone back to school – and the excellent vaccination programme which should continue to move us back to a greater degree of normality in the months ahead.
My view is we should not underestimate the further boost this will provide to the housing market, not just in terms of demand but also supply with people who might have felt wary about putting their home on the market during lockdown being more confident to do so, as the Covid-19 restrictions are eased. If you have felt in the least bit vulnerable then you would not have welcomed visitors looking around your property over the last year – I suspect that will now begin to change for many.
The same situation will also develop in the private rental sector where new prospective tenants might find they have more properties to review as existing tenants seek different kinds of homes to live in, and we see a much more competitive PRS. Add in those new properties which landlords have added to portfolios in recent months, and the choice should remain relatively strong, albeit with tenant demand still ahead of supply – which will clearly be good news for rental yields and value.
Overall, there is much to be positive about. Advisers have already talked about the boost the Budget has given in terms of client enquiries, and we anticipate landlords will be amongst those most likely to eye up the market, perhaps thinking they are able to purchase in 2021 and potentially still secure a slight stamp duty saving.
The further good news is that buy-to-let lender appetite remains strong, and a competitive market offers advisers and their clients the flexibility and product choice they might not have dreamed of just 12 months ago. We appear to be a long way from Lockdown 1 now, and we certainly look at the months ahead with a renewed vigour and a great deal of enthusiasm for the business that can be written.
Bob Young is chief executive officer at Fleet Mortgages