2020 has been a challenging year for the UK property market. A global pandemic, lockdown, redundancies and economic uncertainty have all affected the buoyancy of the market and caused considerable damage. The government’s stamp duty measures, combined with pent-up demand, have helped to revive the market, but what will 2021 hold for UK property? Danny Luke, from house buying company Quick Move Now, gives us his top property predictions for the next year.
1. We will see a drop in prices, but it is likely to be a correction rather than the predicted price crash
A house price crash has been predicted since the beginning of the first lockdown in March 2020, but has yet to materialise. In fact, stamp duty measures brought in by the government in response to the pandemic have not only averted a crash, they have helped to boost the property market. Nationwide building society’s house price index suggests that annual house price growth rose to 6.5% in November 2020, which is quite impressive considering that the UK slipped into a double-dip recession in the same month.
The deciding factor for house prices in 2021 will be what happens after stamp duty measures end on 31st March 2021. My prediction is that we will see a dip in property prices, but not on the vast scale that has been predicted. The Centre for Economic and Business Research has suggested that house prices could fall by 14% in 2021. I would suggest that we will see a correction, but how far prices fall will depend on whether any additional government measures are brought in to support the property and job markets. Higher unemployment will, of course, have an impact on property prices and volume of transactions, so the more jobs that can be protected, the better our property market will fare in 2021.
2. Stricter lending criteria will make things difficult for first time buyers
As we saw in the 2008 recession, mortgage lenders become increasingly cautious in challenging economic conditions. Despite the government’s stamp duty measures, we have already seen many lenders reducing their higher LTV products. Buyers are being asked to stump up higher deposits, with many would-be buyers struggling to secure mortgage finance with anything less than a 15% deposit. Throughout 2021, we are likely to see fewer first-time buyers able to get a foot on the property ladder, which will undoubtedly cause a slowing further up the property chain.
Lenders may also reduce how much would-be buyers are able to borrow in relation to their income, in an attempt to reduce their risk.
3. More challenging conditions for landlords may lead to a shortage of rental properties and rising rents
As a property buying company, we buy any house. This includes former rental properties. Over the last 12 months we have seen a 60% rise in the number of landlords asking us to buy their rental properties. It has also been reported that, nationally, a third of landlords are planning to sell off at least one rental property. This could result in a significant shortage of rental properties in 2021, which would see the already high cost of renting rise further.
The property market has fared far better in 2020 than predicted and is ending the year on a high, both in terms of sales volumes and house prices. Unfortunately, 2021 looks like it may be a little more challenging. It is difficult to predict exactly what will happen after stamp duty measures end in March, but it is likely that demand will fall and that will have an impact on property prices. Mortgage finance is also likely to be more difficult to secure as the full economic fallout of the pandemic becomes apparent. This will have an impact on the volume of sales and the price that is achievable with fewer people in a position to move.