Spring is usually a popular time to put your home on the market. But with the Covid-19 pandemic, is now a good time to sell your home?
This time last year in April 2020, national lockdown meant the housing market was firmly closed. People could not sell their homes even if they wanted to. Even after the market started opening back up, there were concerns that buyers would be cautious and house prices would drop.
However, those concerns never came into fruition. 2020 saw a house buying boom, with average house prices rising around 8.5% in the year to December 2020. The main reasons for this included:
- Pent up demand from the first lockdown.
- The Stamp Duty holiday introduced in July 2020 which gave buyers a tax break on residential purchases worth up to £500,000.
We are now well into 2021 and it seems like Covid-19 is finally on its way out in the UK. So, with the vaccination programme underway and the gradual lifting of lockdown restrictions, is spring 2021 a great time to put your home on the market?
Here, we look at some of the factors that are likely to impact the housing market this year to help you decide.
Stamp Duty holiday extension
The main driver behind the 2020 housing market boom was the Stamp Duty holiday. This tax break was originally due to end on 31 March 2021, potentially putting hundreds of thousands of transactions at risk of receiving a surprise tax bill.
On 3 March, the government announced it would extend the Stamp Duty holiday to 30 June 2021, with a tapered extension on purchases up to £250,000 to 30 September 2021.
You can read more about the Stamp Duty holiday extension here.
What does this mean for sellers?
It appears that buyers are continuing to take advantage of this new opportunity to save up to £15,000 in tax in England. Nationwide Building Society’s Chief Economist, Robert Gardner, suggests that various factors, including the Stamp Duty holiday extension mean the housing market is “likely to remain buoyant over the next six months”.
However, sellers should be aware of the risk of buyers missing the first Stamp Duty holiday deadline. The average conveyancing transaction takes around 12-14 weeks to complete. With the 30 June deadline fast approaching, it is highly possible that any transactions started now will miss the deadline.
There is also the tapered deadline of 30 September – between 1 July and 1 October, buyers can save Stamp Duty on purchases worth up to £250,000. So, although some buyers may be hit with an unwelcome tax bill, it does not automatically mean that the transaction will fall through.
Sellers thinking about selling in the second half of 2021 should also be cautious. The long-term outlook for the housing market still remains uncertain. Nationwide’s House Price Index revealed that house prices dropped 0.2% month-on-month in March, possibly as buyers anticipated the original end of the Stamp Duty holiday. There is no indication yet whether the end of the extended Stamp Duty holiday will have a similar effect.
The new extended Stamp Duty deadline also coincides with the end of the Coronavirus Job Retention Scheme (Furlough Scheme), so there could also be increased job uncertainty in the second half of 2021 that could affect the housing market.
Mortgage Guarantee Scheme
The coronavirus pandemic has had the biggest impact on first time buyers as few benefit from the Stamp Duty Holiday (first time buyers already get 100% tax relief on purchases worth up to £300,000).
Combine that with increased job insecurity, furlough, house building delays and the 2020 housing boom which caused average house prices to shoot up by 8.5%, first time buyers have been left behind.
However, it has long been known that first time buyers are the lifeblood of the housing market. In 2020, 72% of Bird & Co’s clients were first time buyers and the government has long stated that it wants to help more people on to the housing ladder.
So, in March, the government announced that it is introducing a new Mortgage Guarantee Scheme to back low-deposit mortgages and help more first time buyers get a mortgage.
You can read more about how the Mortgage Guarantee Scheme works here.
What does this mean for sellers?
More buyers in the market means more demand for homes, which often means an increase in house prices. First time buyers can also be a great option for sellers because they come with no chain, reducing the risk of delays during your transaction.
A number of high street banks and building societies have already joined the Scheme, however, it is too early to tell whether it will have a significant impact on the housing market.
New Stamp Duty surcharge for non-UK buyers
As of 1 April 2021, property buyers who are not resident in the UK must pay a 2% Stamp Duty Land Tax surcharge over the standard rates of Stamp Duty for purchases in England and Northern Ireland. The aim is to free up more homes for UK-based buyers.
You can read more about the new Stamp Duty surcharge for non-UK buyers here.
What does this mean for sellers?
People selling their home before 1 April may have seen an increase in demand as non-UK buyers try to get into the market before the surcharge came into effect.
Certain areas of England and Northern Ireland, such as Central London, are heavily bolstered by international investment. The new surcharge could cause house prices in such areas to decrease, although this remains to be seen. The biggest impact – if there is any – is likely to be on the luxury property market in London, so most sellers will not have to worry.
£125 billion in excess savings to potentially spend on a new home
The Bank of England recently reported that between March and November 2020, UK households accumulated an excess of £125 billion in savings. It seems the uncertainty of Covid-19 and lockdown restrictions which mean we have not been spending as much on leisure, holidays or entertainment over the past year has helped people to save.
What does this mean for sellers?
Although the Bank of England suggests that households may continue to be cautious about spending, it does mean that more buyers may have been able to save up the amount they need to put down a deposit on a house or flat.
So, there could be greater demand in 2021 which could push up average house prices and help sellers secure a better offer on their home.
Is now a good time to sell your home?
There are some market factors that suggest selling now is a good idea, but there is also a lot of uncertainty about the future.
So, the only person who can truly say whether you should sell your home now is you. If it is right for you and your family, and you can budget for it, you should probably go for it. We always recommend that people speak to an independent financial advisor if they are unsure about whether to take a big financial step such as selling their home.
Do you need advice about selling your home?
At Bird & Co, we are specialist firm of Law Society accredited conveyancing solicitors who help people across the UK buy and sell their homes.
We can handle all the legal aspects of your transaction on your behalf, making the process as simple, straightforward and stress-free as possible.
Get a conveyancing quote online to see how much your transaction is likely to cost, then a member of our conveyancing team will be in touch shortly.
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