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What Will Happen To House Prices In 2021?

House Price Predictions For 2021

Following the Spring 2021 Budget, our property industry professionals have voiced their future predictions for the property market with overall positivity.

The Chancellor’s Budget speech announced that the Stamp Duty Land Tax (SDLT) holiday will be extended to the end of June to be followed by a tapering of the SDLT with the nil rate band falling to £250,000 from July until the end of September. Furthermore, the introduction of the 95% mortgage Help to Buy mortgage scheme was also announced which will help buyers get on the property ladder. In response to this we have put together our predictions on what will happen to house prices over the coming year.

Looking Back

Despite being one of the most economically unpredictable years in history, 2020 ended with UK house prices at a record high. HMRC reported that UK house prices increased by 8.5% in the year to December 2020, up from 7.1% in November 2020. On a non-seasonally adjusted basis, average house prices in the UK increased by 1.2% between November and December 2020, compared with a fall of 0.1% during the same period a year earlier (November and December 2019) and the average property in December 2020 was £251,500, Scotland saw house prices increase by 8.4% in the year to December 2020. Northern Ireland saw house prices increase by 5.3% over the year to Quarter 4 (October to December) 2020.This was largely due to the stamp duty holiday which was introduced to prevent a house price collapse.

But the burning question everyone wants answered is: What does all this mean for the property market facing us in the coming year?

What Will Happen To House Prices In 2021?

Predicting UK house prices not an exact science. Part of this is due to uncertainty over government policy and other factors, such as how much longer the pandemic will last, how effective the vaccination programmes prove to be, how businesses and employees act post-pandemic, and Brexit. Add this to the usual (also unpredictable) factors that have always influenced the housing market, like the global economy and the uncertainty seems to grow and things get a little confusing.

However, this doesn’t stop us making a few educated predictions about what 2021 has in store for residential property prices.

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Dodging A Dip

Halifax predicts that house prices will at best level off in 2021, possibly falling due to the slow economic recovery that is expected, coupled with an anticipated rise in unemployment when the furlough scheme and other support measures finally end. Halifax supports this prediction by observing the slowing of house price growth towards the end of 2020.

Certainly, the most common reason for house prices falling is a decline in the economy  since people with mortgages lose jobs or suffer drops in income and can no longer keep up their repayments, forcing them to sell in a hurry. These ‘pressure sales’ drive prices down.

However, the government is clearly eager to minimise the economic impacts of the pandemic, shown by the various support schemes on offer. Banks too are being patient, participating in the government’s mortgage holiday programme. So although a crash remains a possibility, it seems more likely that the government support schemes and the strategies of the banks could prevent people defaulting on mortgages and hold off forced house sales.

Rebalancing

A realistic prediction therefore, is that house prices will level off in 2021, perhaps falling a small amount, but that a 2008-style full on collapse is a much less likely scenario.

However, there is widespread speculation that prices in urban areas will cool off, in favour of a hotting-up in the suburbs and the countryside; the pandemic has caused the UK public to radically reassess what it wants (and needs) from a home. Over the past year, fed of up being effectively trapped in the city, homeowners in London and other major cities are being drawn towards more rural settings.

Of course, the pandemic cannot last forever but it has proved that for many industries, home working on a large scale is achievable and can even have some advantages. This could mean that demand will increase for larger properties based further away from workplaces, bearing in mind that all this could very well happen again in a few years’ time. Perhaps this might instigate a rebalancing across the North-South divide.

Affordability

Buyers who could now potentially borrow far more on their mortgage could enjoy fewer overheads meaning their affordability criteria will be more relaxed. Even working from home just one or two days per week can save significant amounts of commuting costs that can be put towards mortgage repayments.

On the other hand, in the long term, London’s appeal might actually be enhanced by the lockdown; social and cultural activities are among the things people miss the most and when restrictions are lifted buyers could flock back.

Nevertheless, with the rise in need for home offices, the appeal of bigger homes and more outside space could outweigh the benefits of city living for some. Others, no doubt, will never lose their love of the hustle and bustle of busy city streets. So it is possible that  the imbalance of property prices across the country could soon get a lot less extreme.

Buying Strategies For 2021

If you’re in a town or city and looking to move to a quieter commuter town, you may find yourself in a seller’s market. If distance from your workplace isn’t an issue, then you should find a plentiful choice of locations.

If you’re in the country and looking to move to the city, now is quite possibly as good a time as any. There may be bargains for investors to pick up, which may recover their value if cities become popular again.

The rental market has performed strongly, especially during the last half of 2020. At certain points in the year, demand in the private rented sector was 20% higher than in 2019, showing rental homes have been hot properties.  Click here for a buy to let conveyancing quote.

This will likely continue to throughout 2021 as job uncertainty will lead to people continuing to rent for longer. With savings account interest rates at record lows, many are struggling to save up enough for a deposit. Look here for a buy to let conveyancing quote.

Conveyancing Supermarket will help you compare conveyance fees in a matter of minutes. Compare conveyance fees online for buying and selling houses today.

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