2020 – an unexpected year not just for economy or real estate sector but about everything else – but the year closed out on a positive note for UK real estate market. Unexpectedly, the real estate sector in the country thrived well during the pandemic and even in the last quarter of 2020, the property prices were at a record high, touching unprecedented heights.
During recession when the economy takes downturn or any other upheaval when unemployment rises and all we sense is uncertainty around – theoretically, property prices should be slashed. This is what happened during the global financial crunch 2008 but not in this crisis, at least in UK and at least so far. Does this indicate that it is the right time to invest in real estate sector or it is the right time to sell your property at higher price?
According to a report released by building society and mortgage provider Nationwide that though it was unbelievable back in March, April when the global pandemic hit the country that average home prices will reach to £230,920 by the end of year 2020 after growing 7.3% annually.
According to real estate experts the UK realty market always faces undersupply of quality residential properties that fit into the buyers’ budget. Therefore, during this pandemic when there were properties in the market along with lower mortgage deposits and lowest interest rates, we expect a rise in property prices. More and more home mortgage money taken by people is injected into the housing market but the prices did not increase at the same pace.
However, Covid-19 situation added some unexpected elements to this already complex mix. For instance, the lockdown has affected the livelihood of many and left several others at a better financial position. The people who retained their income also spent less on a number of things including childcare, petrol, outings and foreign trips. And this all resulted in some extra savings and a hefty amount will be directed to mortgage deposits.
Moreover, the government made sure to rescue real estate sector, the UK government temporarily abolished stamp duty due on the sales of properties up to £500,000. This discount was an encouraging step for previously hesitant customers, who came out to search properties thus increasing demand of the UK properties.
Therefore, a sudden spike in the demand of UK properties has been observed, right after the first national lockdown was uplifted as large number of new buyers entered into the market. And a number of people saw jumping on the bandwagon of purchasing the property, while seeing others doing the same. On an unconscious level, we feel safer in crowds and find it difficult to go against the flow. Psychologically, we feel comfortable to buy property, while seeing other people buying the properties too.
Mr. Robert Gardner, Nationwide’s chief economist, said that the behavioural shifts may continue providing support for housing market activity with stamp duty exemption, will continue to provide the boost to the realty sector by bringing more homes on the market.
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