This MT Week was previously available to paying subscribers only. It has since been made available to the public.

If you found it useful, please do consider subscribing to get it delivered to your inbox as soon as it’s published. It’s readers like you who keep this newsletter going. Alternatively, you can buy me a ko-fi.

House prices are soaring - but it’s not a good thing

The latest Halifax House Price Index has revealed some telling statistics about the state of the housing market.

The headline - “House price growth on strongest run since 2004” - indicates a positive boom for sellers.

The price of an average house in the UK is now £253,243 - an increase of 1.2% compared to the previous month and a whopping 7.6% increase compared to the same time last year.

Compared to an inflation rate of 0.9%, as measured by the Consumer Prices Index including owner occupiers’ housing costs (CPIH), it’s gone up leaps and bounds.

A combination of pent up demand, low interest rates, unexpected savings pots and of course the stamp duty freeze has created a perfect storm, triggering this surge in house prices.

But therein lies the rub - while the stamp duty freeze has been a salient excuse to buy right now, the price inflation is already wiping out any savings on some properties.

Russell Galley, Halifax’s managing director, points out: “House prices rose by more than 1% in November, adding almost £3,000 to the cost of a typical UK home. At just over £253,000, the average property price has risen by more than £15,000 since June.”

He adds: “It is interesting to note that the stamp duty saving of £2,500 on a home costing £250,000 is now far outweighed by the average increase in property prices since July.”

And once the stamp duty freeze is over? It’s not hard to predict that a crash might be on the way.

What it means for you...

This inflation is of course great news for sellers and prices are probably going to be as good as it gets for the next couple of years - provided the sale can successfully go through before the stamp duty freeze ends, of course.

Otherwise there may well be a flurry of buyers pulling out of the sale at the last minute when they realise they can’t actually afford the purchase with the stamp duty.

Buyers should be even more cautious and ask whether it’s a good deal.

And now is an especially important time to work out the numbers - the stamp duty freeze is due to end in March, with no confirmation that it would be extended, and the backlog in the system means sales may not complete in time to take advantage of the savings.

So, if the property you’re buying remains a good deal without the stamp duty saving, by all means proceed with caution. This is particularly important if you’re in a chain and rely on other sales to go ahead.

If the numbers only add up when you have the savings from the stamp duty freeze, you may want to think twice, negotiate harder or wait until next year when house prices are likely to fall. Or if you still want to go ahead, make sure you have enough funds to cover stamp duty in case your sale doesn’t go through in time.

Share

Money Talk is on Twitter and Facebook! Come and say hello.

I’d love to hear your feedback about Money Talk - it helps me tailor the newsletter to you and offer you better value. Drop me a line by clicking the button below.

Contact me

How coronavirus has impacted different industries

The Office for National Statistics’ (ONS) latest article on which industries have recovered and which haven’t makes an interesting read, especially if you’re hunting for jobs or make investments.

It highlights the fact that the hospitality industry recorded almost no output in April and May, which is of course the result of the lockdown.

While some of these businesses have returned, the sector as a whole is still significantly smaller compared to February.

For the service industry, it adds: “At this stage, it is difficult to separate temporary losses of output, brought about by coronavirus restrictions, from longer term behavioural changes that could affect industries for years to come.”

In effect, some of those sectors may never recover because our habits have changed.

In contrast, “industries such as information and communication, where staff could largely work from home, saw little change compared with February” according to the ONS.

The sector that’s been consistently performing above average (and growing)? Dispensing chemists.

Leave a comment

New Paypal fee starts next week

A quick reminder - if you haven’t used your Paypal account for a while, it’s time to log in.

From 16 December 2020, Paypal will be charging inactive users £12 a year to use the service.

An inactive user is anyone who hasn’t logged in for a year or more, and presumably hasn’t made any transactions either. It won’t charge you if you have no money in your PayPal account, though.

Fortunately, you don’t actually have to spend or deposit any money - PayPal just requires you to log in once a year. Alternatively, you can just clear the balance on your account.

Share Money Talk

This week’s key numbers

UK GDP grew by 0.4% in October but it’s still lower than the pre-pandemic level in February.

The Wealth Tax Commission believes that a one-off wealth tax could significantly contribute towards the government’s Covid-19 deficit. It posits a five-year, 1% tax on those with individual wealth of £500,000 or more, which could raise £260 billion even after factoring in non-compliance and administrative costs of the tax.

Best buys

In case you were thinking about switching to Virgin Money, they currently have a switching incentive of a case of wines worth £180. It’s not a monetary switching offer but it is the last one out there, for now.

Current account: Virgin Money 2.02% AER

Instant access savings account: Nationwide Start to Save 1% AER (pay in up to £100 a month)

Regular savings account:

Natwest Digital Regular Saver 3.04% AER (pay in up to £50 a month, with higher rate paid up to £1,000)
Cambridge Building Society 3% AER (pay in up to £100 a month, no withdraws)

Share this on Twitter

Finally...

This week I picked up our Christmas cheeses - a plucky, flavourful bunch that I could smell through my mask even though they were neatly wrapped and inside my bag. And now they’re permeating every corner of my fridge, and will cause a bit of a stink every time I open the fridge door.

I mention this because every year I spend a small fortune on cheeses and this year, well, I spent a little more than I’d like. Partly because when you go to a cheesemonger to get your selection, it’s hard to tell just how much a wedge will cost you. And partly because, well, it’s Christmas and the season to indulge.

This year, the impulse to indulge is perhaps stronger than any other. With this in mind, the next MT Focus going out to premium subscribers will be all about moderating your spending habits.

PS, if you’re an Amex customer, their Shop Small offer is back. Basically you get £5 cashback every time you spend £10 or more at a participating small business, up to £50. You have to enrol online or on the app and make your purchases by 20 December.

Give a gift subscription

Money Talk

MT Week - Soaring house prices, future of…