It’s not difficult to see that COVID-19 has impacted quite a lot of everyday life and the world as we are used to it. A lot of industries have seen financial impacts, and the property market is just one example of an industry which has been adversely affected by the coronavirus.
To really grasp the situation, it’s probably a good idea to talk about how the property market has been damaged, what consequences have stemmed from this, and what the British government has done to try and prevent the property market from outright collapsing beyond repair during the pandemic.
To begin with, we have to look at how the property market is irretrievably tied to people. Without people to buy properties, sell properties, contract estate agents, utilise moving companies, and move house, the property market has no momentum. It falls into a rut, spinning its wheels ineffectually with no way forward.
So when the coronavirus pandemic got serious, and the government began to introduce lockdown restrictions, the property market began to free fall because one of the rules for lockdown was that moving house wasn’t allowed. Sales were paused, contracts left unfinished, the moving process stuck in limbo.
Of course, even when the restrictions were lifted, quite a few sales fell through due to changed circumstances or a lack of funds. So, even when the property market could get back on its feet, it still had it’s knees cut out from underneath it.
Stamp Duty – The Saving Grace
So, what saved the industry? Why didn’t the property market collapse in the face of lockdowns, sales falling through, and less incentive to move house?
The government couldn’t change the first two, but it could tackle the third. To try and help the property market, the government slashed the stamp duty on property sales.
Let us clarify what stamp duty is. You know when you move house and you get those fees you have to pay? One of those is called stamp duty. It’s a tax that you pay on a single purchase of property. However, to combat the decline of the property market, the government implemented a freeze on all stamp duty for properties with a value below £500,000.
The idea behind this being that it could protect the industry from falling into complete disarray. Honestly, It did pretty well in this regard, and there has been substantial rejuvenation for the property market, although obviously it’s not as prominent as it could be.
So, while it could be argued that the stamp duty holiday is propping up the market, this period is coming to an end. Understandably, this does raise quite a few questions about the viability of the property market in a post stamp duty holiday world. There are concerns about bank lending policies, as well as interest rates. The banks are not making it easier to get a loan these days, which is going to make moving house even harder. There is a distinct lack of employment at the moment as well, so people’s ability to put down capital to move house is significantly reduced. All of this adds up to challenges in the road ahead.