Britain’s housing market appears to be defying gravity. Though the country is experiencing its deepest recession on record, prices have remained robust and transactions have resumed. Expectations that interest rates will remain low have helped boost house prices alongside gold, tech stocks and many other assets. But the question remains for how long the UK’s property market can keep resisting economic forces pulling prices down.
While Britain’s economy shrank by a fifth during the second quarter of 2020, house prices were about 1.7 per cent higher than a year before in July, according to the Nationwide Building Society. Official data is not yet out but transactions also appear to be on the rise: a closely watched survey by the Royal Institution of Chartered Surveyors showed new instructions from sellers and inquiries from buyers were up sharply during July.
Partly this reflects pent-up demand. Neither buyers nor sellers were able to act when the economy was under the strictest lockdown. House viewings were some of the first economic activity to resume but it takes a lot longer to buy a house than to order a drink from a bar. Many of those who could work from home saved money on their commute and other associated costs while noticing, once again, all the things they did not like about their house. The government too has added to demand by cutting the rate of stamp duty, a tax levied on transactions.