5 interesting things the pandemic has taught us about the housing market

Covid has been a shake-up for pretty much every industry and sector imaginable, as lockdowns prevented trade and forced many businesses to furlough staff over the past year and a half.

The housing market was far from immune from the impacts of the pandemic, which brought the whole industry to a standstill from March to June 2020. With estate agents closed and house viewings off the table during those months, the housing market was simply unable to operate.

Yet remarkably, the market bounced back and flourished for the remainder of the year, reaching record highs across the UK.

These unique circumstances contain a myriad of lasting lessons that the pandemic has taught us about the housing market.

1. The housing market doesn’t necessarily follow recessions

While industries such as hospitality suffered throughout 2020, the housing market ultimately boomed. Prices rose to record highs, with the average price in Scotland reaching £163,131 by December 2020.

For context, the hospitality sector lost £53 billion worth of sales, with the UK economy shrinking by a record 9.9% throughout the year.

Perhaps even more remarkably, growth did initially continue into 2021, up to an average of £168,230 in March 2021. However, this has now slowed with an average price of £161,401 as of April 2021 – the last time data was available.

An economy being in recession clearly can mean nothing to the housing market.

2. Expert predictions are as good a guess as anyone else’s

Even once Covid became a tangible reality in the UK, its mysterious impact on the housing market still blew expert opinions out of the water. In fact, the closest estimates can only be attributed to little more than luck.

There’s rarely full consensus over what will happen to house prices in a year. In 2019, Garrington’s UK Property Market Review predicted a 0.2% decrease in Scottish house prices in 2020, due in part to “uncertainties surrounding Brexit”.

Meanwhile, in December 2019, Which? wrote that 2020 was “unlikely” to see a slump or a boom in prices, with no knowledge of the impacts Covid would have to inform their opinion.

The lesson for you to learn is simply to not rely on one prediction any more than another. All experts rely on the same data and factors, making educated estimates to what will happen.

3. City living is out, countryside living is in

One big, and potentially lasting, change Covid has had on the housing market is the shift from living in cities to living out in the suburbs and beyond.

Lockdowns led many people to reassess their housing needs, leading to many city dwellers fleeing their homes in search of bigger gardens, home offices, and more space for their money.

According to a report in the Guardian, estate agents reported increases in buyer registrations in East Neuk in Fife, as well as an increase in searches around Inverness and Shetland.

Similarly, property index Rightmove reported that rental searches for homes with gardens rose to a record high as lockdown restrictions lifted in May 2020.

As Covid also changed the working landscape, with nearly half of all employed people working from home at some point, many people are now entirely swapping out the office for Zoom meetings and virtual working.

These could be lasting changes, making countryside homes more valuable and city living less desirable.

4. A Land and Buildings Transaction Tax holiday holds great power

Some experts have attributed part of the market’s success to the government’s Land and Buildings Transaction Tax (LBTT) holiday, rejuvenating the market by offering prospective homebuyers a smaller tax bill on their home purchases.

LBTT is a tax charged on property purchases above the nil-rate band (NRB) of £145,000, under which no tax is due.

As part of the recovery strategy, the government increased the NRB for LBTT up to £250,000 to encourage homebuyers to make the most of more than £10,000 of tax savings.

While it may not be the only factor that ultimately mattered in the market’s recovery, the LBTT holiday certainly helped to drive demand.

Clearly, tax holidays still hold a power. If the tax breaks are ever introduced again, it could help reduce your costs if you’re buying, and increase the chance of you selling your home.

5. You shouldn’t ever bank on house prices falling

Perhaps the most important lesson you should take away from Covid’s impact on the housing market is that you should never bank on house prices falling, no matter the context.

If even a recession doesn’t necessarily indicate a drop in price, it realistically means there’s little to no value in trying to time the market when you’re looking to buy.

This is especially true for first-time buyers looking to climb the first rung of the ladder. The demand for larger deposits is as high as ever, regardless of what prices are up to.

As a result, the lesson is to not worry about prices and forecasts. Your priority should be finding a deal that works for you in your personal circumstances.

Bear in mind, this isn’t necessarily the case if you’re buying to let. If you’re intending to become a buy-to-let (BTL) landlord, timing the market can be important as it could impact on how much money you’re able to make on your investment.

Whatever your reason for buying a home, a mortgage broker is indispensable. At Edinburgh Mortgage Advice, we can assist you in finding the right deal that works for you in your circumstances.

Need help buying a home?

If you’d like to find out more about how we could help you in buying your home, please do contact us.

Email [email protected] or call 0131 339 2281 to speak to us.

Please note:

Your home may be repossessed if you do not keep up repayments on a mortgage or other loans secured on it.

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