What’s the current house price forecast for 2021?

Thinking of buying a house? We break down the latest UK house price forecast and take a look at what’s been affecting the market this year.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Row of terrace houses.

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Is the UK facing another housing boom? Or will the property market gradually level out? With shifting trends and the end of the stamp duty holiday, what’s the house price forecast for the rest of 2021?

Let’s take a look.

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The property market so far in 2021

The Nationwide Building Society says that annual house price growth in the UK reached 7.1% in April. Month-on-month prices also jumped by 2.1% – the equivalent of £200 a day!

The main cause of this was Rishi Sunak’s announcement that the stamp duty holiday will finally come to an end in September. As a result, buyers rushed out to try to secure properties within the tax holiday window.

The market is currently very hot. According to Hamptons International, the number of homes in England and Wales with offers from three or more buyers shot up to 41% in March 2021.

The Bank of England shows no signs of increasing interest rates from their current level of 0.1%, and lenders are trying to compensate for spiralling prices with cheaper mortgage rates and easier terms.

All of these factors add up to a house price boom. But is this the picture for the rest of 2021?

[top_pitch]

Current house price forecast for 2021

The conditions currently driving up UK house prices are likely to remain in place for at least the next six months.

The following are all likely to have an impact on the housing market in the coming months:

  • Tapering off of the stamp duty holiday. The threshold for stamp duty will remain at £500,000 until the end of June, then drop to £250,000 from July until the end of September. Stamp duty thresholds will then return to normal in October.
  • Extension of the furlough scheme until the end of September.
  • Introduction of the mortgage guarantee scheme, which is set to run until December 2022.

House prices have also been driven up by buyers wanting to change the type of property they live in. Remote working has become more achievable, which has meant buyers are interested in more space or are happy to endure a longer commute.

Savills has forecast that house prices will rise by 4% in 2021. It expects housing transactions to hit 1.4 million in 2021, before dropping back to the norm of 1.2 million by 2023.

Similarly, Knight Frank has forecast that house prices will increase by 5% in 2021. But it says it expects normal seasonal patterns of activity to begin to return to the market following the end of the stamp duty holiday.

[middle_pitch]

Is it a good time to buy?

Buying a house is a personal decision. House prices and market conditions make up just a small part of the bigger picture.

Forecasts are just forecasts. They are not set in stone, and changing market conditions throughout the year could result in prices falling.

For example, first-time buyers could be excluded from the market if prices rise to unaffordable levels. If first-time buyers are squeezed out, this could gum up the whole market.

Similarly, the end of the furlough scheme could have a big impact. We may find that many homeowners are no longer able to afford their current properties and will look to move. A potential influx of properties onto the market could have a cooling effect and cause prices to drop.

Basically, while it’s interesting keeping an eye on house price forecasts, it’s not something you should base your decision on. It’s better to focus on your personal financial situation and the sort of property you need right now.

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