What is the next scheme that will light a fire underneath the UK property market?

Bruce Burkitt - Property Experts
21st July 2021
Question 709

Now the Stamp Duty deadline has passed we are seeing just how much of an impact the tax break had on driving activity in the UK property market since the turn of the year.

According to recent reports from respected property portals, such as Rightmove, 2021 has seen the most active first half of a year on record, whilst this frenzied period has led to a sharp rise in average prices.

Whilst there are a number of factors behind the mini-boom we have recently seen, including continued low-interest rates, people returning to work following the second lockdown and changing needs in buyers’ demands – from more space to less need to live so close to the office – the SDLT holiday extension was an added incentive that got people moving.

According to Rightmove, from January to June 140,000 more sales were agreed on than the long-term average, but there were 85,000 fewer new listings in the same period, which has led to a shortfall of over 225,000 properties on the market.

In Lehmann’s terms, supply has not been able to keep up with demand and what we will likely now see is a slight cooling off of activity, whilst the market catches up. From our own perspective, as an active property investment and development company, we have sold out our last three developments, launched in the past 12 months, in record time. Leaving us searching for new projects to progress, sooner than we would have anticipated.

So, once we’ve all caught our breath, what is the next scheme that will reignite the market and boost activity once more?

Help to Buy –

The Government’s 95% mortgage scheme has its supporters and detractors, but it has certainly helped first-time buyers onto the ladder since its inception in 2013. The scheme is scheduled to close to new applicants in December 2022 before fully closing in March 2023, at which point the Government’s total investment is expected to reach over £20 billion.

Whilst there are calls for the Government to extend the current offering or introduce a new one, I would expect to see another gold rush of activity at the end of next year before the door slams shut on the current offering.

Flexible mortgage schemes –

We’re seeing a number of banks and developers join forces to offer first time buyers exclusive schemes that could support Help to Buy, with a view of providing a legitimate replacement when the scheme closes.

One example is the Deposit Unlock scheme offered by Newcastle Building Society, which is backed by a select group of developers. The package provides purchasers with the opportunity to buy new-build homes up to a value of £330,000 with a 5% deposit and a 3.5% mortgage rate, fixed for two years.

We are also seeing an increasing number of High Street banks begin to offer 5% mortgages again, essentially taking the place of the Government’s Help to Buy scheme, by offering to lend buyers an additional 10% of a traditional 15% deposit, meaning they only need to front up 5% themselves.

This will continue to prop up the first-time buyer market, however, there will be new and innovative schemes released that will have a similar impact on the market as Help to Buy and the SDLT holiday.

These could include cuts to SDLT rates (especially on second home purchases) in the next budget announcement – stranger things have happened and if the Government feels the market needs another injection of adrenaline, then this is a proven tactic to supercharge activity.

To remedy the issue of lack of new stock hitting the market, we could see a new scheme that would ease the current restrictions and additional financial commitments on second home purchasers and landlords. There is an urgent need to get this portion of the market moving again and a shot in the arm for private landlords would see activity, especially in the middle of the market, surge almost immediately.

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