The Housing Market

Even before COVID-19 hit the United States suffered from a housing crisis. Due to a huge split across the country, working-class and low-income Americans struggled to pay rent, whereas higher-end-jobs can own more than one property. For instance, in California, 41% of the population spends over a third of their income on housing costs.

As millions are unable to work and the economy dives into recession, the demand to buy or rent houses is falling, hence, the price is rising. However, you would think that as the unemployment rates are increasing, the prices will increase too (<— prices will decrease). Well, this is not the case for all of the states in the US. For instance, in San Francisco, the rent is becoming a lot cheaper than it was due to unemployment being over 12%. Hence, there are a lot of predictions of what may happen to the housing market and how it will affect people and businesses. Since there are three kinds of cities in the USA. There are fast-growing, rich cities: New York, Seattle. There are declining ones such as Detroit and Clevelands, due to being manufacturing-centric cities. Then there are Sunbelt cities. Depending on which type of city it is, the housing market is different compared to others as the quality of life and income stories are different. Although they all have the same opportunities. This is why the housing market is not similar to others in the USA. 

Although the US housing market is showing resilience as it tries to not get the effect of the economic fallout of the coronavirus pandemic, still there is uncertainty on how long this will last. One of the predictions is that the housing demand will stay very high, however, the rate of the increase is expected to slow down. For now, we can only predict what will happen next and hope that by the spring of 2021 it will return to ‘normal’. 

The UK house market 

The situation in the US is one that represents most of the housing markets in the world: As unemployment levels sky-rocket and countries enter periods of recession, people can't afford to buy new property. However, this isn’t the case in the UK. In fact, the situation there is the complete opposite- the prices for houses have jumped at the fastest rate in more than 4 years, having risen 7.5 % compared to the year before. This begs the question- How?

Well to sum it up, the secret lies in a scheme imposed by the government called the “Stamp Duty Holiday”. “Stamp duty” is a UK tax that you pay when buying property or shares. In the new scheme, the rate for this tax was cut to 0 for all properties below the cost of 500,000. This, paired with the hunt for bigger houses with more outdoor space caused by the lockdown, has resulted in the demand for property soaring, causing such a huge rise in prices. 

However, there is a problem- this price rise likely won’t last. As we get deeper into the pandemic, we can see how economies are declining and entering deeper recessions, resulting in higher and higher levels of unemployment. With all this, the house prices in the UK are likely to start falling soon, as more and more people lose their jobs and more and more businesses shut down. Already, there has been a fall in the rate of growth of prices, only a 0.3% increase compared to 7.5% in October. This decline in the demand likely forecasts the situation for the rest of the year- prices that keep on falling. 

Another problem that will contribute to the price drop, is that the “Stamp Duty Holiday” must end someday. More precisely, on March 31, 2020. On this day, the struggling market will likely receive a further hit, as prices will see a sudden rise due to the return of the Stamp duty tax. This rise will then decrease the demand for houses even further. So you see, while the UK’s “stamp duty holiday” scheme has delayed the trouble for the housing market, it has by no means solved it, only delayed the inevitable.

Written by Aidana Assylbek and Togzhan Batyrbekova; edited by Alidar Kuatbekov.