Around a million house sales will take place this year but the market will favour established home owners and cash buyers, according to a forecast.
Savills said it expects around 1.06 million transactions across Britain in 2020.
This is around a quarter of a million more than it had previously predicted, before Chancellor Rishi Sunak announced a temporary stamp duty holiday in July.
The holiday applies to England and Northern Ireland and raises the “nil rate” band of stamp duty to £500,000 until March 31. Similar measures have taken place in Scotland and Wales, which have different property taxes.
Savills had originally forecast 775,000 sales this year, but revised its prediction in the light of the “mini boom”, and noted that constraints on new borrowers mean conditions favour those with equity, creating a market dominated by mortgaged home movers and cash buyers.
Against a backdrop of job loss announcements across several industries, lenders have pulled many low-deposit mortgages in recent months as this is seen as riskier lending.
Transactions are expected to increase to over 1.2 million next year, despite weaker underlying market conditions, the report said.
Savills also set out its expectations for house prices in the coming years.
It predicted that prices across Britain will increase by 4% during 2020, before flattening out across 2021, with no real movement.
Prices are then expected to pick up again, so that over the five-year period starting in 2020 and ending in 2024, prices will grow by around a fifth (20.4%).
Expectations that interest rates will stay lower for considerably longer will underpin the growth, Savills said.
Over the five-year period, the regional pattern of price growth is expected to reflect the stage the housing market cycle was at before Covid-19, the report said.
This points to markets further from London being the strongest performers, with price growth expectations for the North West of England at 27.3% and in Scotland at 25.4%, for example.
“While we clearly can’t ignore the economic backdrop, other factors, including a stamp duty holiday, have unleashed an unexpected wave of activity in the market and added to the pent-up demand coming out of lockdown,” said Lucian Cook, Savills’ head of residential research.
“Many people are reassessing their work-life balance, seeking a change of location or a trade up the ladder. The unexpected stamp duty holiday has given a further boost to the market, particularly in higher value locations through the commuter zone and lifestyle relocation hotspots.
“The end of that stamp duty holiday and a projected rise in unemployment are expected to cause the market to slow in 2021, with the very real prospect of price falls at points during the year, hence our forecast of zero annual growth.
“But from a mortgage affordability perspective, a fall in the income growth forecast has been outweighed by the expectation of a continuation of ultra-low interest rates over our forecast period as a whole. That provides more capacity for house price growth over the medium term, tempered by the impact on loan-to-income ratios and mortgage deposit requirements.”
Here are Savills’ new predictions for house price growth over the five years between 2020 and 2024:
– London, 12.7%
– South East, 17.3%
– East of England, 17.3%
– South West, 17.3%
– East Midlands, 22.6%
– West Midlands, 21.7%
– North West, 27.3%
– Yorkshire and the Humber, 24.1%
– North East, 21.7%
– Wales, 22.3%
– Scotland, 25.4%