What will happen to property prices in the next year?
David Hannah, Cornerstone Tax, discusses the long-term implications on the UK property market and what will happen to property prices in the next year.
Last week marked a year since the shutdown of the British property market, which triggered arguably the most tumultuous 12 months in market history.
Almost half a million home sales were suspended and service providers scrambled to mitigate the impending price falls – only for the furore to be followed by a market boom in May, followed by the introduction of the stamp duty holiday in July which has since saved buyers an estimated £3.1bn.
Now, with the planned easing of restrictions underway as Britain looks to return from almost a year of lockdown, what will the next 12 months bring for the housing market?
David Hannah, Founder and Principal Consultant of Cornerstone Tax, discusses the state of the housing market in Britain today, and looks ahead to offer key factors to bear in mind that will likely characterise the market trajectory for the coming year:
“Unlike many other industries, the UK property market has proven its strength and resilience over the past few months.
‘This was in no small part due to the Government’s determination to prop up the market by introducing the stamp duty holiday. Unveiled by Chancellor Rishi Sunak in July, the holiday has been credited with fuelling a mini-boom in the property market.
“2021 will be an interesting year for the property market, with the continuation of the stamp duty holiday giving the market a boost, but the economic impact of the pandemic and Brexit likely to drag it back down.
“With this in mind, here are some of the key factors that will influence the market in 2021.”
Remote working culture and new priorities
Space will continue to be a deciding factor in transactions, as buyers look to upsize after a year spent mostly at home – requiring office space and gardens. Movement out of cities will likely continue, as employees continue to work remotely and we move from a city-centre based economy to more of a local one.
With this in mind, demand for rural and ex-urban properties will continue to rise, and inner city properties with no gardens will remain unattractive and may suffer price drops throughout 2021.
However, a relaxation of lockdown rules may result in many businesses reintroducing on-site working practices and the reopening of many of city centres’ cultural attractions – it will be intriguing to see how this will impact the market if the prospect of a long commute from outside the city comes back into play.
Stamp duty extension and vaccine rollout
At the start of 2021, many feared that there would be a spike in the market as buyers rushed to complete transactions ahead of the original end of the stamp duty holiday in March. However, the stamp duty holiday has now been extended into the summer, affording more time for the vaccine rollout to progress and for lockdown restrictions to be eased.
With this in mind, I expect that the summer cooling off period that many predicted at the start of the year will not materialise, and instead we will see market activity sustained well beyond the summer and into autumn.
The pandemic fallout bites back
Though we are likely to see activity sustained for many months this year, the end of 2021 could spell a slump in the housing market, as the long-term effects of the pandemic begin to come into play.
This year will see the end of government support measures which have protected people’s finances and acted as somewhat of a buffer for the housing market. When these schemes come to an end, the true economic impact of the pandemic will come to light and will likely contribute to a sharper drop in the market.
2022 and beyond
In early 2022 we should start to see the economy stabilise, with a tentative rise in mortgage lending and house prices. As the economy begins to recover following the inevitable turmoil caused by the end of government support schemes this year, we will hopefully come to witness a broader, more stable, and more sustainable future for the housing market, and banks will be more willing to lend to first-time buyers.
Kindly shared by Cornerstone Tax
Main photo courtesy of Pixabay