With the UK economy beginning to rise and forecast of considerable growth, not least by the IMF, there has been a sharp increase in property prices which has taken the average up to a record high of £261,743. Chief economist at the Bank of England (BoE) Andy Haldane, said the UK housing market is “on fire” and as a result is likely to hit those without property especially hard.
The housing market has been fuelled by a combination of government incentives for buyers, like the stamp duty holiday, more demand from households with savings after the lockdowns, and a lack of homes for sale, Haldane said.
The chief economist said the recent rise in house prices — which topped 10 per cent, according to official data — was very likely to worsen pre-existing wealth inequalities. In the 12 months to May, the average house price has increased by £22,000, according to Halifax data.
The government’s stamp duty holiday, which saw stamp duty scrapped on properties worth up to £500,000, is largely the reason behind the UK’s booming house prices in the last year. The BoE’s deputy governor Jon Cunliffe said the Bank was watching the housing market “very carefully” in the wake of the boom.
Prior to that, Sir Dave Ramsden, another one of the central bank’s deputy governors, said the BoE expects the price pressures to be temporary. “There is a risk that demand gets ahead of supply and that will lead to a more generalised pick-up in inflationary pressure,” Ramsden said. “That’s something we’re absolutely going to guard against. We’re looking carefully at the housing market and a raft of real-term indicators.”
Foreign buyers from primarily East Asian nations are cashing in across London’s new build market as a result of a weaker pound. According to new research by the defect management firm BuildScan, fluctuating exchange rates during the pandemic added to the appeal of the London property market for many foreign homebuyers, particularly those from China, South Korea and Japan.
BuildScan analysed new build property prices across London and found that throughout 2020, Covid caused them to slump by -3.4 per cent, until the sharp rise began this year. The exchange rate has provided the Asian buyers with considerable discount.
But the change in exchange rates didn’t benefit every East Asian nation. During 2020, the pound strengthened when compared to the Singapore dollar, meaning that while a London new build was still more, this discount sat at just -2 per cent.
Homebuyers from Thailand (-1.8 per cent), Malaysia (-1.2 per cent) and Hong Kong (-0.9 per cent) also secured a smaller discount, while those from Indonesia were actually paying 2.2 per cent more despite a drop in new build property values.
“Despite the problems posed by the pandemic, we’ve continued to see a high degree of interest in the London market from East Asia. This has been driven, in part, by factors such as British National Overseas (BNO) visa availability for those relocating from Hong Kong, as well as the opportunity to cash in on a stamp duty saving,” explained Harry Yates, founder and managing director of BuildScan.
“In addition to these draws, we’ve also seen fluctuating exchange rates boost the affordability of London new build homes which has also caused many savvy investors to act sooner rather than later,” he said
“Although the pound has rallied of late, the London market remains an area of focus for many foreign buyers and with market momentum returning at a slower rate than elsewhere around the UK, now remains a good time to invest,” Yates added. (The writer is our foreign correspondent based in the UK)
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