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It is amazing to see that, despite the pandemic, the average UK house price ended the year 7.3% up on the previous year (Source: Nationwide). And there is still a lot of heat in the market - with record property portal activity on Boxing Day being 70.5% up on last year! (Source: Zoopla). You might expect that tougher Covid-related restrictions and our formal departure from Europe at the end of last month would have seriously damaged the property market, yet the opposite seems to be true.
Certainly, the government’ SDLT (Stamp Duty) concession, which can save buyers up to £15,000, has played its part in increasing both transaction volumes and prices. As estate agents, we have been run off our feet for months, and any break over Christmas was short-lived, as activity has continued unabated.
Some commentators have suggested that over 250,000 sales agreed could potentially fall through or, more likely, have price reductions if they don’t complete before the SDLT concession is withdrawn on 31st March. There has also been the suggestion that mortgages might become increasingly difficult to obtain if lenders are worried about employment stability.
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Will the Nottingham
Property Market Crash in 2021?
… and the three reasons why it will not be the
catastrophic scenario some are predicting
In the last few months, the Nottingham (and UK) property market has resisted and flouted every economist’s prediction. With the economy a shadow of its former self, unemployment set to hit 11.9%, the Government on track to borrow nearly half a trillion pounds to pay for Coronavirus support packages etc., all of this has had no effect on Nottingham homeowner’s enthusiasm or capability to want to move home. It highlights the influence of both the emotional impact of lockdown and the enticing appeal of saving thousands of pounds on your Stamp Duty Tax bill.
For the last few months, the Nottingham property market has been akin to a surfer, riding an unexpectedly large wave. The question is, will the surfer crash down (i.e. the property market) onto the rocks or will it calmly arrive at the beach unscathed? Well looking at house prices firstly…
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The 2020 Review of the Nottingham Property Market
Looking back at the Nottingham property market for 2020, it can certainly be seen as a frenetic game of two halves, albeit with a very long half time in the spring. Between the General Election in mid-December and Christmas, many Nottingham agents saw an unusually higher uplift in activity in the property market just as we were getting ready for Christmas 2019. Yet once the New Year festivities were out of the way, that pre-Christmas uplift in the local property market was nothing when compared to the bang on Monday 6th January 2020 with the fabled ‘Boris Bounce’ of the Nottingham property market. January, February and most of March were amazing months, with the pent up demand from people wanting to move from the Brexit uncertainty of 2018/9 being released in the first few months of 2020.
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Nottingham Landlords and Second Homeowners Will Probably Save Money from the Proposed New Capital Gains Tax changes
If the proposals were adopted in full, some Nottingham landlords would pay £8,000 less Capital Gains Tax than they would currently
The government borrowed £394bn this financial year (April ‘20 to April ‘21). This figure does not include the cost of November lockdowns and support measures, which means the final bill will probably be over half a trillion pounds. Ultimately these billions will need to be paid back to cover the cost of Coronavirus.
The Office of Tax Simplification (OTS) published a report for tax reform and, as was predicted by many in the press, the Government Dept suggested the Chancellor contemplate readjusting current Capital Gains Taxation (CGT) rates with a person’s own Income Tax rates. This would mean increasing the rate of CGT for selling a buy to let property from 28% to 40% for high-rate taxpayers and 45% for additional rate taxpayers. To add salt to the wound, the OTS is suggesting cutting the £12,300 annual CGT allowance.
This has led to many Nottingham buy-to-let landlords contacting me in the last few weeks, wondering if this is the time to exit the Nottingham buy to let property market, especially as they have been hit by growing levels of rental legislation and higher taxes.
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The sale of property is one thing that has not been curtailed during the second lockdown and, as estate agents we have been busier than ever. And we expect this to continue long into the Christmas/New Year season, as there’s a lot of catching up to do for some very keen buyers.