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Prepare yourself for UK house prices to fall 14% next year

Prepare yourself for UK house prices to fall 14% next year
Image source: Getty Images.

The UK housing market has been soaring since reopening after the coronavirus lockdown, but house prices could be set to plunge by as much as 14% next year if predictions by the Centre for Economics and Business Research (CEBR) are anything to go by.

Let’s find out more.

House prices’ changes after the lockdown

According to Nationwide, one of the UK’s leading building societies, during the months of May and June, house prices in the UK fell by 1.6% month-on-month. This, however, changed in July after lockdown measures began to ease. In July, house prices rose by 1.7% compared to June’s figures.

The rise in house prices in July was also accompanied by a 14.5% increase in the number of residential property transactions compared to June, according to HM Revenue and Customs.

In August, house prices went up even further, experiencing their biggest monthly rise (2%) since February 2004.

What’s behind the mini-boom in house prices?

1. Pent-up demand

During the lockdown, estate agents could not conduct in-person house viewings, leading to massive house sales delays according to CEBR. After the reopening, the pent-up demand (totalling 150,000 house sales) was unleashed onto the market. The ultimate result? A massive spike in house prices.

2. Stamp duty holiday

The stamp duty holiday announced on 8 July 2020, which allows buyers to potentially save up to £15,000 when buying a house costing below £500,000, is another factor that might have pushed house prices up as people rush to take advantage before it expires in March next year.

3. Suspension of house repossessions

When the pandemic struck, the government put in place guidelines and regulations that significantly curtailed repossession actions by both mortgage lenders and landlords. This, according to the Ministry of Justice, led to mortgage possession figures including claims, orders, warrants and repossessions dropping by more than 95% when compared with figures from the same quarter of the previous year.

For example, there were only 161 mortgage repossession claims in the second quarter. During a typical quarter, there are usually close to 6,000 mortgage repossession claims, with the actual number of houses repossessed averaging 2,000 per quarter.

The effect of the suspension of house repossessions has been a reduced number of houses coming onto the market. This particular phenomenon created an imbalance between supply and demand and thus higher house prices.

4. The Coronavirus Job Retention Scheme

The government’s Coronavirus Job Retention Scheme has also led to fewer job losses and helped sustain demand in the housing market.

Will house prices really fall by 14%?

The measures and factors that have led to a soaring of house prices are ‘transitory’ in nature. They won’t last forever and once they wane, house prices will fall by almost 14% next year, according to economists at the CEBR.

The stamp duty holiday, for example, only runs until the end of March 2021. The pent-up house demand due to the lockdown is also likely to cool off in the next few months.

In addition, the government’s furlough program that has prevented the loss of millions of jobs is also set to end in October as is the suspension of house repossessions.

CEBR predicts that these changes will hit the housing market hard, and the result might be a massive drop in house prices. The decline will begin at the end of the year and continue into the first half of next year. A mini spike might, however, occur as the stamp duty holiday comes to an end.


While forecasts by CEBR regarding house prices might appear gloomy, the real future is unpredictable. For example, we still don’t know the effect that a second wave of the coronavirus or a no-deal Brexit might have on the housing market.

However, if you have a vested interest in this market and are worried, don’t panic.

The future might appear bleak and house prices might plunge as predicted by CEBR. But as history has consistently shown us, the property market in general has quite a remarkable ability to sustain itself. In the long term, it always bounces back.

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