Residential Property Market Review – June 2021

Renting less expensive than buying a property

Research from estate agency Hamptons, suggests that renters are better off than buyers for the first time in five years.

The study found that, just prior to the pandemic in March 2020, the average buyer with a 10% deposit was better off than renters by £102 per month. In May 2021, however, buyers were found to be worse off by £71 per month on average, spending £1,125 on mortgage repayments against the average £1,054 for renters.

This pattern has extended to most of Britain’s regions, with only three regions (North East, North West, and Yorkshire and the Humber) cheaper for buyers than renters in May 2021. On the other hand, London buyers have been hit hardest, going from being £123 better off a month buying (March 2020) to £251 better off renting (May 2021).

Stamp Duty holiday taper approaches

The temporary Stamp Duty nil-rate threshold of £500,000 (applicable in England and Northern Ireland) will end on 30 June, with a tapered threshold of £250,000 then applying until the end of September. From July, the maximum saving buyers can make will fall from £15,000 to £2,500.

This will make June an exceptionally busy month for the property market, says Knight Frank, with buyers racing to complete their transactions for maximum savings. Indeed, the number of offers accepted in May, was the highest monthly figure in a decade, and 55% higher than the same month in 2019. However, it is expected that activity will fall off in July as the Stamp Duty threshold falls and the holiday season makes its return.

2021 looks set to be a record-breaking year in many ways. According to Knight Frank, the number of viewings per available property hit a ten-year high in May and properties have gone under offer more quickly. Zoopla expect total sales completions this year to be over 1.5 million, marking 2021 as one of the most active sales markets since the global financial crisis and one of the top 10 busiest years since 1959.

Value of mortgages rises

Bank of England (BoE) mortgage data for Q1 2021, has revealed an increase in the value of outstanding mortgage loans over the past year, reflecting heightened buyer demand for property.

The outstanding value of all residential mortgage loans at the end of Q1 2021 (£1,561.8bn) was 3.6% higher than the end of Q1 2020, while the value of gross mortgage advances soared by 26.5% to £83.3bn in the same period.

The continuing record low BoE base rate has not benefited as many buyers as anticipated, however. The proportion of mortgage advances with a rate of less than 2% above bank rate stood at 59.1% for Q1 2021 – 13.3 percentage points lower than the year before – showing that many lenders did not pass on the base rate reduction to customers.

Meanwhile, a fall in the availability of high loan-to-value (LTV) mortgages during the pandemic, was reflected by a 4.1% decrease in mortgages at LTV ratios of 90% and higher, which stood at 1.1% in Q1 2021 – the lowest figure since records began in 2007. This is lack of availability is likely to be addressed by the launch of the government mortgage guarantee scheme for small deposit homebuyers, resulting in more high LTV products making a comeback.

View the latest property market statistics.