Frenzied activity leading to many buyers paying more than market value in order to secure purchases.
The housing market is in an extraordinary state at the moment.
As we exited the first lockdown last year, the Government introduced a temporary Stamp Duty holiday in order to boost activity, meaning that buyers pay no tax on the first £500,000 of any purchase.
And it’s proven incredibly effective, to the point that the holiday has been extended from its initial deadline of April, and is now being phased out in stages before the Stamp Duty regime returns to normal in September.
The latest stats from HM Revenue & Customs show that in May, around 103,000 property transactions took place.
Unsurprisingly that’s massively up on last year when the market was on pause, but it’s also higher than we tend to see in May anyway.
In fact, only in May 2014 were purchases higher than those seen this year.
And that heightened level of activity is leading to incredible spikes in house prices – as we highlighted in our exclusive analysis.
This isn’t just affecting the amounts you can ask for your property either. It’s even led to a jump in the number of homes selling for above the asking price.
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Paying over the odds
New analysis of sold price data from the Land Registry by property portal Rightmove shows that in January ‒ the most recent month for which this data is available ‒ more than a third (37%) of properties were sold for their asking price or above.
That’s the highest level ever recorded by Rightmove.
To put that into context, back in January 2020, before Covid started causing havoc, around 28% of homes were sold for at least asking price, while over the long-term average dating back to 2005, just a quarter (23%) of homes fetched this amount.
Separate research from price comparison site Compare the Market also highlighted the return of gazumping, with almost four in 10 buyers (39%) admitting that they had bought their home by outbidding a rival offer that had already been accepted.
The hottest property hotspots
Of course, talking about the housing market as if it’s a single, homogenous thing is a bit inaccurate.
Some areas are far more in demand than others, and so are more likely to see buyers willing to push themselves up to, or even above, the asking price in order to secure those keys.
Here’s how those different regions break down in terms of the percentage of homes selling for at least the asking price, and the average percentage of the asking price achieved.
|
Region |
Proportion of homes selling for asking price or above |
Proportion of final asking price achieved |
|
Yorkshire and The Humber |
45% |
98.5% |
|
North West |
41% |
98.2% |
|
East Midlands |
40% |
98.4% |
|
North East |
39% |
98.1% |
|
West Midlands |
39% |
98.3% |
|
East of England |
37% |
98.4% |
|
South West |
35% |
98.1% |
|
South East |
34% |
98.0% |
|
Wales |
32% |
97.4% |
|
London |
30% |
97.4% |
|
England + Wales |
37% |
98.1% |
Clearly, there’s a pretty wide variance here. Yorkshire and The Humber is so in demand that almost half of the properties sold there in January went for at least the asking price, if not more, an incredible proportion.
It’s also the region, unsurprisingly, where on average sellers received the highest proportion of their final asking price.
By contrast, less than one in three properties that sold in London in January went for the asking price or more.
This may be a response to the pandemic in itself. As people have spent more time working from home, and are perhaps more inclined to work remotely for at least part of the week, the attractions of city living are not what they once were.
We’ve already seen estate agents report spikes of interest in more rural areas, as Brits look for a better work/life balance after Covid, and this seems to be affecting the areas seeing buyers paying above market value for a property.
Will it last?
Context is everything here.
The Stamp Duty holiday has made a big impact on making purchases more affordable for many, while the Government’s introduction of a mortgage guarantee scheme ‒ which encourages lenders to offer more low deposit mortgages ‒ has also meant that would-be buyers who have struggled to get the funding they need are now in a better position to buy a home.
But the first phase of the Stamp Duty holiday ends next week, meaning that tax is once again paid on purchases above £250,000.
How buyers react to once again having to pay Stamp Duty on their housing purchases will give us a good indication of what the market will look like in future.