News

 

UK Property Market Supported by Favourable Macro-economics


21 Jul 2021

 

With the stamp duty holiday set to expire in less than three months, what direction will the property market take? Will this take all the wind out of the sails that have propelled the UK market to 10% annual growth in March 2021? Read on and be in the know about where the market is headed.

 

As buyer demand and prices surged in 2020, you could have been excused from thinking that the property industry had become uncoupled from the broader economy. By year’s end, GDP growth had fallen by 9.9%, the biggest drop in over 300 years. Property prices had jumped by 7.8%, driven in no small part by the stamp duty holiday. With the government stimulus now drying up, the importance of the macroeconomic environment comes sharply back into focus.

 

The good news is that:

  • The Bank of England (BoE) has recast its forecast for 2021 GDP growth to 7.25% for 2021 on the back of a successful vaccination program and the consumer economy roaring back to life as lockdown restrictions are lifted.
  • The BoE is forecasting unemployment to peak at 5.5% in the autumn, up from the 4.8% that the Office for National Statistics calculated for the March quarter. The resilience of the jobs market has surprised on the upside.
  • The official BoE Bank Rate continues to sit at 0.1%. In the aftermath of the GFC over a decade ago, the cash rate has not risen above 1%. Leading economists expect that there will be no increase before 2024 although there are inflationary blips on the BoE radar.

Finally, consumer confidence is buoyant. Household consumption accounted for 58% of the total UK economy in 2020. The BoE reported that with the recent easing of lockdown restrictions high frequency indicators of economic activity including motor vehicle traffic, retail footfall and restaurant bookings have increased. UK consumers have amassed a war chest of £203bn in savings through lockdown, a fair chunk of which can be expected to find its way into the property market.

 

Will these favorable tailwinds be strong enough to counter the negative impact of the withdrawal of government fiscal stimulus? Get the full story and download the UK Holmes London Property Market Review now to be in the know.