Paresh Raja

Hitting the ground running

As we progress through the early stages of 2021, commentators have been struggling to make heads or tails of what this new year will have in store.

Countries around the world are still reeling from the effects of Covid-19 and, here in the UK, the economic consequences of Brexit have yet to be fully realised.

As such, analysts have struggled to confidently forecast how 2021 will unfold. The exception to this rule, however, is the UK property sector.

Even as national lockdowns were imposed, clever government policies were able to release pent-up demand for UK real estate, which had incredibly positive results. In fact, strong transactional activity supported a level of house price growth that hadn’t been witnessed since 2015.

Of course, the question now is whether this incredibly strong performance can carry over into 2021. Will the fallout from Brexit deter international and domestic property investment, leaving house prices to remain as stagnant as they were between 2016 and 2020? Or can this strong showing be sustained, with the property sector leading the way in the UK’s post-pandemic economic recovery?

Personally, I’m optimistic that we should be witnessing some robust, reliable property price growth in the next year.

Adjusting to the ‘new normal’

Days into 2021, a surge in Covid-19 cases has resulted in the third national lockdown. Unlike previous lockdowns, this is happening at a time when a vaccine is being rolled out across the UK. Hopefully, this means we are witnessing the beginning of the end of the pandemic. 

There is good reason to be bullish about the future prospects of the property market in 2021; Rightmove anticipates average house prices to rise by 4% in the coming 12 months.  

Their reasoning, based on the belief that any negative political or economic developments simply cannot stand up against the increased demand for property by those who have remained homebound for the majority of 2021, is – in my opinion – sound. 

Of course, there will still be some issues to deal with. Increased mortgage application denials have been recorded throughout 2020, meaning that many prospective buyers may have to turn to alternative, non-high-street lenders in order to secure the necessary financing to complete on transactions.

Changes to stamp duty here soon

Despite lockdown, I expect there to be a new surge in buyer demand for properties across the country in the coming months. This is because of two impending changes to stamp duty land tax (SDLT).

Firstly, the end of the SDLT holiday on March 31st will mean that buyers will once again have to pay this additional tax on properties valued below £500,000. The reform was initially introduced in July 2020 to spur property investment and has evidently been successful.

Secondly, the introduction of a 2% overseas buyer surcharge means that international investors will soon be burdened with a substantial additional cost – the precise value of which depending on the price of the property they’re acquiring. This new tax, due to come into force on April 1st, provides a huge incentive for overseas buyers to complete on property transactions before this policy becomes law. 

After this surge in activity, although there may be a brief period of lull, I expect the UK property industry to continue moving from strength to strength. If 2020 has taught us anything, it’s to not underestimate the ability of this sector to continually provide impressive returns on investment, even during the most uncertain of periods.

For specialist finance lenders, it is our responsibility to ensure buyers have access to the finance needed to complete on property transactions. With banks and mainstream lenders taking longer to process applications, there is a clear role for specialist finance to play in supporting the next wave of investment into bricks and mortar. That’s why lenders must ensure their credit lines are topped up and loans are ready to be deployed. 

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