Times are uncertain for the UK, just as they are for the rest of the world following the coronavirus outbreak. One thing that has remained consistent throughout 2020 is the resilience that the housing market has shown. Property experts predict that 2021 should see positive trends for the market, with lower mortgage rates and stable house prices, making for a potentially lucrative investment.
The year ahead and what’s in store for the UK housing market will depend on a number of factors. Property experts predict another strong year, but the success relies heavily upon the rollout of the vaccination, Brexit, the stamp duty holiday, and the usual housing market fluctuations influenced by the economy. Not to mention the Chancellors Spring Budget announcement ahead of the latest property Market Update in the coming weeks.
Predicting future trends is never easy, but official figures seen house prices rise by 8.5% during 2020, the highest annual growth rate since October 2014. The property market experienced a mini-boom thanks to the stamp duty holiday keeping the sector busy throughout the pandemic. The UK housing market remains hopeful following Chancellor Rishi Sunak’s budget for 2021 that was recently announced. The stamp duty break was due to finish at the end of the month and the furlough scheme set to terminate in April. Thankfully, these have been extended to June and September, so it could be a few months before unemployment peaks and the housing market suffers.
Housing price growth
Whilst there has been a record number of housing transactions, sales activity will no doubt slow down when the stamp duty holiday ends in June. Furthermore, leading housing companies Knight Frank and Savills predict little to no increase in house prices; however, prices should rise again in 2022. There will be many factors that go into how and when house prices will increase, such as unemployment rates and the success of the vaccine, and only time will tell how quickly the market moves over the next few years.
The rollout of the Covid-19 vaccine has provided a certain level of confidence that the UK should be able to return to normal life by the end of 2021 and start work on the damage caused to the economy. The more people that are vaccinated and how successful it is against the virus will determine just how confident we are when it comes to the property market.
Housing priorities have changed
Not only has the low-interest rates on mortgages and stamp duty cut encouraged people to buy, but a change in priorities has also led to a record number of housing transactions. Both homebuyers and tenants have questioned their current living conditions throughout the pandemic as people experienced lockdowns at home in an effort to try and minimise the spread of the virus.
With so much time spent at home, and the need to work remotely, people are looking to upgrade their space, whether it be to a bigger property or for a better internet connection. Buy to let landlords have also noticed this change and have started to include remote working space and smart living technology into their properties to keep up with tenant demand.
Stamp Duty
The news the entire country had been waiting for, the Chancellor’s announcement to extend the stamp duty tax break. The holiday was originally set to end on the 31st of March but has now been extended to the 30th of June. This has relieved the pressure for thousands of buyers and sellers throughout England and Northern Ireland, who faced property transactions that would not complete in time to meet the deadline, meaning they would have missed out on substantial tax savings.
According to RWinvest, the stamp duty holiday has enabled a return to a fully functioning property market following the slow start and uncertainty we experienced at the beginning of the pandemic. Thankfully, the Chancellor’s decision to implement the stamp duty holiday prevented a house price collapse. As the UK housing reports from 2020 show, the average property was selling for £253,374, which was up more than £14,000 compared to the year before.
Mortgage rates
In addition to the extension of the stamp duty holiday, the mortgage guarantee scheme has also been announced to help buyers with 5% deposits secure mortgages on properties worth up to £600,000. Rishi Sunak mentioned that the government would support portions of the mortgages to attract lenders, and mortgages through this scheme should come into play from April 2021. This is ideal for first-time buyers who have been hit hard by the lack of mortgage availability throughout the majority of 2020, allowing them to get their foot on the property ladder finally.
The scheme will provide banks with more confidence to lend, and there is very little chance of the Bank of England increasing the base interest rate at the moment, which should keep mortgage rates down. This makes it an appealing time to secure a property, as people can benefit from the competitive rates even after the stamp duty holiday ends. 2021 is showing signs of a promising year ahead for those starting to invest in real estate.
Finally, we can also expect to see positive results for the housing market from the furlough scheme set to continue until September. This should help to minimise unemployment rates making it easier for people wanting to buy or rent homes.
