The property market will enjoy a boom, but its fortunes will change when the government withdraws its support measures next year, according to a closely watched survey.
The Royal Institution of Chartered Surveyors said that buyer inquiries, agreed sales and instructions to sell were rising fast, continuing a trend that had surprised analysts when the market emerged from lockdown in May.
It said that growth would continue for the remainder of the year as the surge in demand from people looking to relocate after lockdown had not yet dissipated.
However, it warned that the present rate of growth was unsustainable. The government’s withdrawal of stamp duty relief, which applies to all properties under £500,000, is likely to dampen demand from April next year.
In a survey of 264 industry professionals, the institution found the number of people looking to buy a new property had increased for a fifth consecutive month in October. A net balance of 46 per cent of respondents cited a rise in new buyer enquiries.
The number of new properties being listed for sale also rose for the fifth consecutive month, the longest run of growth in seven years. A net balance of 41 per cent of respondents reported a lift in transaction volumes, above last year’s average of 9 per cent.
The institution said that its members were confident that activity would continue to grow for the next three months, with a net balance of 17 per cent expecting sales to rise. The withdrawal of stamp duty relief will weigh heavily on the market, however, with a net balance of -27 per cent expecting sales to rise over the year. They are also cautious about house prices.
“As current guidelines permit the market to stay open during the second lockdown, respondents expect the latest upturn in sales to continue for the rest of the year,” the report said.
“However, moving into next year, the outlook for sales remains subdued, as respondents cite the withdrawal of government support measures and a difficult economic backdrop as a concern further ahead.”
The housing market has defied the broader economic downturn. House prices have continued to rise at a record pace, even though unemployment is climbing and the economy is almost 10 per cent smaller than it was before the pandemic. Although the government has been protecting incomes and jobs, redundancies are expected to gather pace, with the Bank of England anticipating unemployment to peak at nearly 8 per cent next year.
This is expected to dampen demand for new homes. Analysts have warned that house prices could fall by as much as 5 per cent between now and the middle of next year,
Simon Rubinsohn, chief economist at the institution, said: “There is understandably more caution about activity looking beyond the first quarter of 2021. Aside from the withdrawal of governments incentives, the market may also find the more challenging employment picture a significant obstacle even with interest rates set to remain close to zero for some time to come.”