2020 established the first year in Britain’s modern history when house prices and activity levels rose during a recession. Annual house price growth has finished the year at +7.3% (Nationwide data, the Halifax index put it at less optimistic +6.0%).
Data from the most extensive UK property index Zoopla showed that at the end of 2020, housing market activity runs well above of 2019 levels:
- Demand for housing 40% higher over 2020 than 2019;
- House price growth climbs to +3.9% and expected to reach a plateau at 5% in 2021 Q1;
- A strong end to 2020 with demand and sales agreed >30% above last year;
- 2020 registered sales up 9% UK-wide housing market closure of nearly two months;
- Strong rebound in sales activity in southern England pushes the total value of homes sold in 2020 up 26%, providing an extra £62bn in sales;
- Average price inflation for houses (+4.3%) rising at twice the rate of flats (+1.8%) as buyers search for space;
- Strong start expected for 2021 but the housing market not immune from economic factors and price growth will slow to +1% by the end of 2021.
London’s prime markets remained more price-sensitive, with the prime central London market seeing values ease back by -0.4%. Prices rose by an average of 1.6% across the rest of the prime London market. The rest of the capital showed 2.8% price growth.
The rebound in sales has been most substantial in the South East and Eastern regions where they are more than 20% higher than in 2019. Sales agreed have lagged in Scotland, Wales and Northern Ireland due to more extended market housing market closures than in England over the year.
What about the rental market?
London’s rental falls were mostly concentrated in the prime flat market, with rents for larger houses proving more robust income.
2020 also showed a record number of registered buy-to-let companies. From more than 41 thousand, 34% set up to hold buy-to-let properties in London. Together, London and the South East accounted for almost half (47%) of all incorporations of this kind.
The tax benefits of holding property in a company derive from the ability of landlords to offset 100% of mortgage interest against profits. In comparison, those holding property in their name can compensate just 20%.
Capital Gains Tax is undoubtedly something which weighs heavily on the minds of landlords. Almost half (43.7%) believe the tax has hurt their business.
Oracle Capital Group will continue to monitor the situation in the UK housing market to provide useful insights. Our specialists offer real estate, share and asset purchase transactions support, improve shareholder participation, and provide general corporate support to your business.
Head of Investments