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UK Property Boom – Is Now A Good Time To Invest?
After months of the property market being on hold, UK house prices have now reached a new all-time high. A national lockdown caused by the COVID-19 pandemic drew the UK to a complete standstill. Loosening of isolation restrictions has resulted in a “release of pent-up demand” (McKeever, 2020). To further this, Rishi Sunak (The UK Chancellor), recently announced a “holiday” in stamp duty until 31 March 2021 (Barr and Young, 2020). Stamp Duty Land Tax (SDLT), is a sum of money that must be paid whenever an individual purchases a property or a piece of land. With the previous threshold for paying stamp duty being any property purchase over £125,000, the holiday now means that Stamp Duty is only to be paid when a property is sold over a value of £500,000 (Barr and Young, 2020).
A combination of the above two factors have resulted in UK house prices growing by 5.2% in August, when compared to the same time last year. This brings the average property value within the UK to £245,747, which is the first time this figure has ever risen above £245,000 (McKeever, 2020). However, does this mean that now is a good time to invest in property?
With the fear of a severe recession, many economists are forecasting a slump in house prices within the UK. However, successful investing is about finding a balance between fear and greed; if other investors are fearful, then now is a good time to buy and vice-versa. Buy-to-let mortgage deals are now more attractive than ever, interest rates are now starting as low as 1.3%, meaning that investors are now able to buy more on borrowed money than ever before. Although borrowing does increase the risk if house prices were to go down, it only accentuates the reward if they continue to rise. Additionally, an interest-only mortgage of £150,000 can be serviced for around £175 per month. This allows landlords costs to stay low while rent prices rise (Entwistle, 2020). New regulations protecting tenants from being evicted without a 6-month notice period also means that an increasing number of people are looking to rent property.
The next 7 months leading up to 31 March 2021 (the end of SDLT holiday), will be a deciding factor in the strength of the housing market for years to follow. With a recession resulting in many people holding back from spending their money, this opens opportunity for those risk-takers who can see the housing market being profitable. In the end, it does come down to your individual financial situation and your risk/reward factor. There are clearly viable options; however, you need to ensure you have researched effectively, evaluating the relevant outcomes should the market swing either way.
Best of luck,
All at NR Barton
Author: Michael McLoughlin
- Barr, S. and Young, S., 2020. How Might A Stamp Duty ‘Holiday’ Help Me?. [online] Independent.co.uk. Available at: <https://www.independent.co.uk/life-style/stamp-duty-holiday-land-tax-first-time-buyer-rishi-sunak-government-update-a9604106.html> [Accessed 10 September 2020].
- Entwistle, T., 2020. Is This A Good Time To Invest In Property? – Landlordzone. [online] LandlordZONE. Available at: <https://www.landlordzone.co.uk/news/is-this-a-good-time-to-invest-in-property/> [Accessed 10 September 2020].
- McKeever, V., 2020. UK House Prices See Biggest Jump Since 2016 To Hit Fresh High – But It Won’T Last Long, Say Property Experts. [online] CNBC. Available at: <https://www.cnbc.com/2020/09/07/uk-house-prices-see-biggest-jump-since-2016-to-hit-fresh-high.html> [Accessed 10 September 2020].