What’s in store for the UK property market in 2021?

 

The year ahead is uncertain with the coronavirus pandemic and Brexit. However, experts are still predicting 2021 to be a strong year for the UK property market.

The coronavirus pandemic, Brexit and the economy will continue to impact the property market. However, the sector has recently shown resilience during periods of uncertainty. The UK has further stepped up its action plan to stop the spread of coronavirus. These measures will continue to effect the property market.

During the last half of 2020, there has been a property boom. This is expected to continue into 2021. The temporary stamp duty holiday will keep the sector busy until the deadline at the end of March. However, shortly after that, unemployment could reach a peak with the furlough scheme set to end in April.

House price growth will be more subdued

While property transactions have been at record levels, sales activity is expected to slow down in 2021. House price growth is likely to be more subdued as well. Rightmove forecasts a 4% national average house price growth in 2021. Knight Frank predicts house prices to increase by 1%. And Savills expects 0% growth overall. However, for 2022, prices are forecast to rise by 4%.

Many in the property industry feel house prices will pick up again in the coming years. Online letting agent Portico Direct states: “The majority of forecasts state that the market should pick up in 2022 and then move faster over a five year period.”

The impact of Brexit and COVID-19

Brexit is unlikely to have much of an impact on the UK property market in the short-term. Many also feel Brexit won’t effect the sector as much as originally expected. Job uncertainty will likely put more pressure on the property market. This could lead to a lull in transaction numbers in the middle of 2021.

However, the roll-out of the COVID-19 vaccine is giving people more confidence that we will be able to return to “normal” later in 2021. As more vaccine doses become available, this will bring more confidence to the wider economy and the property market.

Nick Barnes, head of research at the estate and lettings agency Chestertons, says: “The arrival of a Covid vaccine has boosted consumer confidence and should enable the economy to recover without the disruption of further national lockdowns. Interest rates are set to remain low and the banks are still keen to lend, whilst the stamp duty holiday will continue to motivate buyers, until the Spring.

“There is still a large number of buyers in the market with the financial strength and confidence to move and Brexit is unlikely to have much short term impact on the housing market.”

Housing demand and changing priorities

Recently, there has been unprecedented demand for moving house, leading to a record number of property transactions. Successive lockdowns have led many homebuyers and tenants to reassess their home priorities.

After spending more time at home throughout 2020, tenants and buyers alike are looking for more space and better internet connectivity. This, along with the stamp duty holiday approaching at the end of March, will likely fuel demand throughout the beginning of 2021.

Portico Direct explains: “As more businesses and employees recognise that working from home is a practical reality, estate agents report a growing demand for larger properties that provide adequate permanent space to work.

“In the build-to-rent sector, there is a similar pattern with corporate landlords developing properties that include home office space, high-speed Internet connections as well as shared workspaces on their sites.”

Mortgage rates and availability

The likelihood of the Bank of England increasing the base interest rate at least in the short term is slim. And this is expected to keep mortgage rates down, which will make it an attractive time to purchase property. Even with the stamp duty holiday set to end, investors will likely take advantage of these competitive rates.

Additionally, banks are gaining more confidence to lend and will continue to do so as more normality returns. This will help further increase availability of mortgage products, which will be welcome news for homebuyers and investors seeking mortgages.

Tim Bannister, director of property data at Rightmove, says: “Interest rates remain at near-record lows, and we expect greater availability of low-deposit mortgages at competitive rates next year. These two factors will help to oil the wheels for home purchases by the ‘accidental savers’ who have collectively saved £100 billion that they couldn’t spend during the pandemic restrictions.”

Despite there being a lot of uncertainty for the year ahead, the UK property market will likely remain resilient throughout 2021. It could prove to be a good time to lock in lower mortgage rates and subdued house prices. Interest rates and house prices are expected to increase in the coming years. This could provide a potentially lucrative time to purchase property.

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