The latest house price growth exceeds the cost saving associated with the temporary Stamp Duty Land Tax reduction, at 7.3%.
Annual house price growth of +7.3% (from Halifax HPI) reflects the release of pent up demand and supply, and the impact of temporary SDLT change.
This figure does not apply to all geographies and all properties, but simplistically: it represents a stark contrast with ‘returns’ available elsewhere.
For example, NS&I just cut their popular direct saver account rate to 0.15%. It’s no surprise that many prefer to keep their money in property. People prefer to put money somewhere they feel is safe, in uncertain times.
So what next? Some in the real estate industry feel this ‘mini boom’ will be short lived, given economic circumstances and forecasts. However, the ‘fundamental’ drivers of housing demand are strong: we are in an environment of low interest rates, with reduced rates of new buildings coming onto the market and limited existing stock.
For investors, the important thing to remember is that capital growth is a great bonus, but shouldn’t be relied on. This is important when lending is cheap, since debt still needs to be repaid.
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