It has certainly been a rollercoaster ride for the UK property market in the last year. The outbreak of the pandemic initially froze the market, but since then, it has rebounded with surprising strength. But what’s the house price forecast for the rest of 2021? Will prices continue to rise or will growth slow and prices fall?
Let’s take look.
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The effect of the pandemic on the property market
During the first lockdown back in March 2020, the government stopped property viewings and prohibited estate agents from marketing new properties as part of broader measures to contain the spread of the virus. Unsurprisingly, the move created pent up demand that was unleashed onto the market upon its reopening in May.
Buyers looking for extra room and outdoor space flooded the market after spending months indoors during which their living requirements changed. This high demand, combined with low housing inventory, resulted in a rise in house prices.
The chancellor introduced a stamp duty holiday in July 2020. This removed stamp duty on the first £500,000 of all house sales. The result? A further increase in demand and a further rise in house prices as people rushed to take advantage of the holiday.
In 2020, average house prices actually went up by 8.5% according to figures from the Office for National Statistics.
Current house price forecast for 2021
At the beginning of 2021, experts generally forecast that house prices would fall in 2021 due to the end of the stamp duty holiday and the economic effects of the pandemic, such as unemployment.
Some still believe that house prices will level off or even fall by the end of the year.
However, the following measures have had an impact on the housing market:
- Extension of the stamp duty holiday to 30 June
- Extension of the furlough scheme to 30 September
- Introduction of the mortgage guarantee scheme (which allows for a 5% deposit on a house)
- The successful rollout of the vaccine
As a result, many experts have revised their forecasts upward and now expect house prices to go up in 2021.
According to Savills, for example, instead of remaining stagnant in 2021, as previously predicted, average property prices will rise by 4% in 2021.
The company says that the housing market outlook has significantly changed since the beginning of the year. Buyer sentiment has improved because of:
- the rapid pace of the vaccination programme
- the anticipated relaxation of restrictions
- government support for the job and housing markets
Similarly, Knight Frank has also revised their UK house price forecast from 0% growth to 5% in 2021. Its revision, like Savills’, comes in the wake of the government’s support measures and the success of the vaccine programme.
Capital Economics has likewise revised their house forecasts from a fall of 4% to a rise of 3% in 2021.
The firm said that that a quick economic recovery, sustained fiscal support and housing-specific measures in the budget could result in the housing market being able to successfully mitigate any adverse impact of the pandemic.
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Is now a good time to buy a house?
There’s no definitive answer to the question of whether now is a good time to buy a house.
Those who have been struggling to save a large enough deposit or who have been dealing with stricter lending rules as a result of the pandemic may be disappointed by the forecasts for higher house price in 2021.
Many will certainly be eager to take advantage of the stamp duty holiday and other government incentives such as the mortgage guarantee scheme. get on the property ladder before houses potentially become completely unaffordable.
Still, it’s worth remembering that rushing to complete a sale before the end of the stamp duty holiday expires carries risks. For one thing, you may not meet the deadline. The pandemic has caused delays in conveyancing and mortgage approvals. If you do not complete on time, you might still have to pay stamp duty.
Also, keep in mind that while forecasts indicate that house prices will rise, they are just that: forecasts. It’s not set in stone that house prices will go up. There is always a small chance that prices could fall. If you wait, you might perhaps get a better deal on a house, even if you have to pay stamp duty.
Rather than trying to base your home buying decision on economic conditions, it could be more beneficial to focus on finding the right home for your needs and your financial situation.
