Possible house price falls in 2021 may not eclipse gains made in 2020 – Halifax
Possible house price falls in 2021 may not be significant enough to wipe out the strong gains already made this year, according to experts.
The ending of the current stamp duty holiday on March 31 2021, the tough jobs market and a lack of low deposit mortgages are expected to curb housing market demand next year.
It follows a “mini boom” seen in the second half of this year, as the reopening of the housing market following coronavirus restrictions and households’ desire to move to homes with more space unleashed a wave of pent-up demand.
Several property professionals expect to see volatility next year, with an initial rush to beat the stamp duty deadline followed by a quieter period.
Halifax expects house prices to fall by 2% to 5% across 2021, although it said uncertainty around its forecast is much higher than usual this year.
But it said that even if prices do fall, this may only partially reverse the increase of nearly £18,000 piled onto the average UK house price over the past year.
Across the UK, the average house price is now £253,243, compared with £235,353 a year ago – marking an increase of £17,890 – according to Halifax.
Russell Galley, managing director, Halifax, said: “While the economy should begin to recover in 2021, helped by the rollout of Covid vaccines, the jobs market will inevitably adjust to the changes in demand that are occurring, and unemployment is expected to rise.
“With the stamp duty holiday also due to expire in March – and lower levels of demand – housing market activity is likely to slow.
“Taking all of this into account, the post-summer surge in house prices is unlikely to be sustained.
“Prices are expected to fall by between 2% and 5% next year, although forecast uncertainty is much higher than usual given the current economic and political environment.
“It is also important to note that such a fall would only partially reverse the almost £18,000 (7.6%) increase in average prices experienced over the past 12 months.”
Estate agent Savills said it expects UK house prices to show 0% change in 2021, but in 2022 it has pencilled in a 4% increase, with a 6.5% uplift in 2023.
Savills also predicts that the prime central London market will eventually bounce back more strongly than the broader London market.
Lawrence Bowles, a director in the Savills research team, said: “2021 looks set to be a year of different parts.
“In the first quarter, sales activity will continue at its current, high level as buyers aim to move before the stamp duty holiday comes to an end on March 31.
“Mortgaged home movers and cash buyers are likely to take the lion’s share of deals, given restricted access to high loan-to-value mortgage finance.
“London and the South of England will see particularly strong activity as these higher value regions benefit more from the stamp duty holiday.”
But he said April and the second quarter of next year will be quieter “without the stamp duty holiday greasing the wheels”.
Mr Bowles added: “On balance, this means we’re likely to see average house prices end 2021 roughly where they started, albeit with volatility through the year.”
Property website Zoopla expects house prices in 2021 to see positive growth, with stronger increases in the first half of the year giving way to more moderate uplifts by the end of 2021.
Zoopla predicts house prices in December 2021 will be around 1% higher than they are in December 2020.
It expects the housing markets in Wales and Scotland to be top performers, and within England, the markets in Yorkshire and the Humber and the East Midlands to lead growth due to properties there being relatively affordable.
By contrast, Zoopla expects the Eastern and North Eastern regions of England to record just 0.5% house price growth across 2021 – just half the average increase predicted for the whole of the UK.
Rightmove meanwhile forecasts a robust 4% increase in the average price tag on a home in Britain across 2021 as it believes people will continue to have their reprioritised housing needs high on their agendas.
Rightmove said this increase would be slower than the 6.6% increase in house sellers’ asking prices that it has seen in 2020.
Sam Mitchell, chief executive of online estate agent Strike, said: “As the curtains close on an unforgettable year, it’s fair to say that as a market we’ve proved to be resilient.
“To put things into perspective, we’ve seen a 36% rise in offers accepted year-on-year at Strike – a phenomenal feat when you consider the market was effectively shut down for two months of this year.
“But the second half of the year did more than enough to make up that.”