Leading property website Zoopla expects the UK housing market boom to slow in 2021, with price growth slowing to 1% next year.
New forecasts suggest the busiest December in a decade and a seasonal rise in demand in January will be followed by a slowdown in sales once a stamp duty holiday expires.
Buyers currently do not pay the tax in England and Northern Ireland on the first £500,000 ($665,000) of a property’s price, fuelling surging demand but creating a cliff-edge as the holiday ends in March.
Zoopla suggest sustained pent-up demand since the first nationwide lockdown froze the market and the rush to hit the deadline will continue to buttress the market in the short-term. Low interest rates, mortgage holidays and the furlough scheme have also cushioned the impact on the market of the wider economy’s troubles.
Its latest figures show average year-on-year price growth at a three-year high at 3.5% over the past month, in an apparent boost for homeowners but a blow to would-be buyers hoping to get on the ladder. Sustained growth comes in spite of England’s lockdown and a “double-dip” downturn as restrictions hammer the economy, in what some economists have called a “paradox.”
WATCH: What the stamp duty cuts mean for buyers and prices now and next year
But 2021 is described in Zoopla’s latest report as a “year of distinct phases,” with the stamp duty deadline’s passing expected to push transactions between 20% and 30% lower than normal levels in the second quarter. Experts had predicted such an “artificial” sharp spike and decline when the stamp duty holiday, designed to stimulate economic activity, was first announced earlier this year.
The 4% price growth predicted this year is expected to be followed by growth of 1% in 2021, as “weaker market sentiment and economic uncertainty reduces the upward pressure on prices.”
Many property watchers have predicted a stark hit all year to the market eventually from rising unemployment and lender and borrower caution as the UK economy struggles.
The market has so far defied expectations of a looming collapse, though there are signs of demand fraying. Zoopla noted price growth was increasingly driven by sales among “wealthier demographics at higher prices,” which could reflect increasing struggles to buy among less well-off households.
But booming sales in the run-up to the deadline are expected by the property site to curb the availability of property for sale in the longer-term. This would mean any improvement in the wider economy, employment or consumer sentiment could see transactions return to 2019 levels “and provide impetus for house price growth in 2022.”
WATCH: Why are house prices rising during a recession?