January 28, 2021
What could happen in the London property market in 2021?
We are now well into 2021. And, while it’s been a difficult start to the new year – with a third lockdown now in progress – the property market has been allowed to remain open.
Promisingly, the market remains buoyant. This is due to a record high demand in the sales market thanks to the upcoming end of the stamp duty holiday. Meanwhile, in the lettings market, demand for rental homes also remains high as people continue to reconsider their housing options in light of the lockdown.
Here, we take a closer look at what could happen to the London market in 2021.
A return to city living
One of the biggest trends after the first lockdown was a move to the country. People sought more space and gardens. Being in the city or close to a station also became less important as offices remained closed and many worked from home.
Despite lockdown 3.0 being in place, the success of the vaccine rollout has offered some light at the end of the tunnel.
There is a chance everything starts to return to some kind of normality again. Just like it did through the summer and the early autumn months of 2020. And that people will seek out the places where live events, restaurants, bars, pubs, cafes and green spaces are plentiful.
What’s more, we could see a shift back to offices for some in the second half of the year as the vaccine rollout continues and warmer weather returns.
It certainly won’t be the case that life will return to how it was pre-pandemic. But as measures hopefully start to be lifted over the summer, there is every chance the appeal of city life will start to increase again.
A decline in international investors
From April 1 2021, non-UK buyers will face an extra 2% stamp duty surcharge when purchasing homes. This is on top of the 3% surcharge levied on buy-to-let and second homes and the normal rates of stamp duty everyone must pay. Which, if the holiday ends as planned, will be back to how they were from April 1 as well.
This double whammy could put off those seeking to buy a home in the UK from abroad. While it is most likely to affect the prime end of the London sales market – which account for the majority of overseas purchases – not all overseas buyers are purchasing million-pound plus homes in Notting Hill. Many will have humbler goals.
It may be the parents of students – from China and Hong Kong – purchasing a home for their offspring. Or there may be overseas buyers looking to purchase a more affordable home in the capital as an investment vehicle.
The extra stamp duty surcharge may make them think twice, even those buying at the lower end of the market.
This could have unintended benefits for UK landlords and investors, and also first-time buyers or second steppers, with competition for homes being lower.
It will only become clearer over time how much of an impact the new tax has. But it’s something for those in the London property market to be aware of.
A possible stamp duty extension
Speculation has been rife that the stamp duty holiday could be extended beyond March 31 2021, its proposed end date. The government has been very reluctant to budge on its plans to end the holiday as planned – after all, stamp duty helps the Treasury’s coffers considerably.
A petition calling for an extension recently breached the 100,000-signature threshold required for a debate in Parliament. However, Jacob Rees-Mogg has reportedly suspended all sessions in Westminster Hall due to the pandemic.
Still, the pressure will continue to be intense and it’s not beyond reason that the government could change its mind late in the day.
According to Rightmove, some 100,000 buyers could miss out on stamp duty savings, if the deadline isn’t extended. That’s a lot of frustrated and angry buyers and sellers.
The pressure on conveyancers, surveyors, lenders, removals firms and agents is also intense, at a time of a global pandemic.
The neline-height: 1.4;xt Budget is on March 3, a little under a month before the holiday ends. And the Chancellor Rishi Sunak will be expected to make an announcement then about the stamp duty holiday.
For now, buyers, sellers, landlords and investors should assume the holiday will end as planned. And work forward with that in mind. The Law Society recently warned conveyancers to be candid with buyers and sellers who desperately want their transactions to be concluded in time for the March 31 deadline, warning that instructions which are still coming though in high volumes have an ‘ever slimmer’ chance of completing on time.
“Clients’ expectations should be discussed to avoid people losing money and being left disappointed,” it said.
There are likely to be further twists and turns in this story. And the pressure on government could reach pressure cooker levels. Keep an eye on our blog page and social media for any new announcements regarding the holiday.
A busy year for landlords
As we pointed out in our most recent blog, 2021 is set to be another very busy year in the lettings market. With opportunities and challenges in equal measure.
Since then, there has been a number of new announcements for landlords to be aware of.
The prospect of Section 21 being scrapped this year took a step closer recently when a junior housing minister intimated that the Renters’ Reform Bill would be introduced ‘very soon’.
Previously, Housing Minister Christopher Pincher said it would only be introduced when there was a stable economic and social terrain in which to do it.
That was back in September, when the pandemic was at a much less critical point than now. Which makes the announcement all the stranger.
There has been little follow-up since, and it does seem like it may have been a slip of the tongue. It still seems far more likely that the Bill will be introduced much further down the line, when Covid-19 is back under control again. And that doesn’t seem likely until at least the summer.
Even then, there is a lot of other pressing business for the government to deal with, regarding the fallout from coronavirus and Brexit.
One thing that is much more certain to come into play is the new Debt Respite Scheme. Also known as Breathing Space, it is set to halt landlords and letting agents from seeking arrears or evictions. You can find out more here.
Talking of evictions, the ban on bailiff-enforced evictions was also extended on January 8 until at least February 21. It will be reviewed then, but is expected to be extended further.
You can read all the details here. Landlords or agents acting on their behalf can enforce possession orders if tenants are more than six months in arrears. These can go to court but cannot be enforced by bailiffs, so is in all honesty a bit of a blunt instrument.
The exceptions to the ban apply as before. In the relatively small number of cases of domestic violence and anti-social behaviour, bailiff-enforced evictions can still take place. But most will have to sit and wait, if eviction is still a necessity.
The government has launched a pilot of a mediation service, too, to try and prevent evictions from being necessary in the first place.
With so much to factor in at present, it’s vital that you work with an experienced, well-respected letting or estate agent.
If you have any questions about letting or selling a home in the London area, Atkinson McLeod is here to help.
To find out more about our services and current operations, please get in touch with our expert team today. You can find out how much your home could be worth on the current market by requesting a free and instant online valuation here.