What’s occurring’ with the Welsh housing market and UK house prices overall?
The housing market in the UK was one of the most affected sectors in the economy by the Coronavirus Pandemic. The point that most people mark as the peak of this halt was in March of 2020 when the pandemic was most prevalent. This narrative has been changing ever since.
The first positive sign was the significant increase in demand when the market opened in May of the same year. This is thanks to an ingenious government initiative to reduce a specific land tax that has changed the market since.
From 8th July 2020 – 31st March 2021, the government decided to lower the Stamp duty land tax rates while raising the nil rate to 500000 pounds. Something that had not been seen before. So the quick question that everyone will ask is, what exactly is a Stamp duty and Land Tax rate?
The SDLT is the North Ireland and English version of a tax that is present in Wales and Scotland as well. This tax is activated when different things happen in different places, here are a few:
- Buying a property above a certain price point.
- Buy a new leasehold
- Taking on a mortgage
Price points or thresholds as they are popularly known are quite important in this case. A threshold of 500000 pounds means that the SDLT only applied if you bought property worth more than the set amount. This simple change in policy is what has caused the rejuvenation of the housing industry.
The growth that followed up until the deadline, 31st March, forced the government to take further action. This decision was further fueled by the number of transactions that were still ongoing by the time the deadline was arriving.
The 2021 budget was keen to include an extension to this policy whose deadline was now pushed to 30th June of 2021. The threshold for SLDT was set to change from 500000 to 250000 pounds, a change that was to take a course from 1st July – 30th September of 2021. After this period, however, the nil rate was to go back to 125000 pounds, the pre-pandemic figure.
This policy change has been hailed as being responsible for the rapid rise of house prices in the second quarter of 2020. The change which is more than what we experienced in 2016 and December of 2020, continued to rise to a new high of 7.3% which is even higher than the rate registered in January of 2015.
A small dip in growth was experienced in March of 2021, which many experts were expecting just before the announcement of an extension. The extension in SLDT reduction which brought back confidence In potential buyers further cemented the growth that was being experienced in the market.
By May of 2021, the annual growth was recorded at an astronomical 10.9% while the average house price had risen to 242832 pounds. According to Nationwide, this price is an increase of 23930 pounds from the average price 12 months prior.
This growth is most realized in Wales where it rose to a record 11.9%. The Halifax House price index points out three areas to be specific that have experienced growth north of 10%, the highest seen in at least 15 years. These are:
- Northeast Yorkshire
- Northwest Yorkshire
The story is not consistent throughout the UK however. Areas that were considered quite expensive, like London and other parts of southeast England have experienced a much smaller rate of growth. This is because property prices were already astronomical in these places. Experts have described this growth in the rest of the UK as catching up.
Buyer preferences which have also shifted, are forcing people to look for property in areas that they normally wouldn’t consider. Wales, for example, has been a good destination for many as houses are way cheaper compared to other parts of the UK.
Experts also point out that more people are willing to spend more of their income on the property. This is explained by the increase in lending options from mortgage merchants and government incentives which nudge people towards that direction.
With restrictions still looming, experts predict that this summer will be quite similar to the one we had in 2020 where a lot of activity was seen in the housing sector. The prices also don’t seem to be dropping anytime soon as the demand levels are still over the roof compared to supply.