Activity in the UK housing market remains high.
Monthly transactions historically average circa 90,000
per month. After the collapse during the first lockdown
volumes increased gradually since the re-opening of the
housing market. Completed sales totalled over 120,000
in January 2021 and in March over 160,000 sales were
agreed. Activity is expected to remain strong during
2021. CBRE assume that the extension of the stamp
duty holiday announced in the recent Budget could
benefit an additional 600,000 transactions. The 95%
mortgage guarantee scheme, also announced at the
Budget, helped in its original form (Help-To-Buy 2013-
2018) around 35,000 (mainly first time) buyers (Source:
CBRE).

All eyes are now set for the upcoming Budget on March 3rd. Naturally the question of whether the Stamp Duty holiday will come to an end captures headlines. A review of previous policy changes to Stamp Duty demonstrates that typically there is no “cliff-edge” to house prices once incentives are reduced. Our analysis compares data sourced from HMRC for residential property transactions in the UK, and the average house price from e.surv (previously known as LSL Acadata). Whilst there is no direct link between SDLT rates and house prices, changes to rates and thresholds do tend to affect demand.

After the unprecedented challenges caused by the Covid-19 pandemic and uncertainties surrounding Brexit ‘deal or no deal’ last year, we believe that private rented residential property has demonstrated its value as a diversifier in portfolios.

2020 will be seen as a defining year for the sector: institutional investors were seen to increase their allocations to residential through the year, attracted by resilient capital values, security of income, low volatility, and low correlation with other asset classes – characteristics which can also benefit retail investors in their own portfolios.

November saw a continuation of a strong housing market even before the positive news on a potential vaccine for Covid-19. The headline house price growth figures continue to be driven by the premium end of the market – both regionally and in terms of types of properties. Wealthier buyers can buy properties despite Covid-19 and benefit most in terms of the current stamp duty holiday. Having said that, the e.surv house price index records positive annual growth across all regions in England and Wales.

The housing market continued to flourish in October 2020, with Zoopla reporting house price growth in October at a two-year high of +3%, up from 1.1% in 2019 and e-surv (formerly LSL Acadata) reporting a 3.4% increase. Zoopla goes on to state that the pipeline for sales is up 50% in the last year and, although demand is tailing off, it is still 44% higher than pre-Covid levels. This increased market activity has again been reflected in the Fund’s property portfolio which increased in value in October for the fifth consecutive month – valuations for October were up 0.12%, giving a cumulative increase of 0.48% over the last five months.