Property listings website Rightmove forecasts a 4% house price growth in the UK in 2021, but price rises for newly marketed homes will be at a slower pace than this year.
According to Rightmove, 2020’s unanticipated market momentum saw prices finish 6.6% up on 2019 — an increase of £19,920 ($26,345) to £319,945 — despite a fall of 0.6% in December.
The economic fallout from the coronavirus pandemic has brought a lot of uncertainty into the property market, which has proven to be resilient.
Despite the headwinds, housing demand and buyer affordability appear to be strong enough to outweigh some of these pandemic-related dampening effects.
It is poised to be a busy start to the New Year, especially in the first quarter as homebuyers race to cross the line before the stamp duty deadline on 31 March 2021.
However, in the run-up to the seasonally quieter Christmas period and the declining chance of completing a purchase before the stamp duty deadline, around 130,000 sales were agreed over the last month, up by 44% on the same period in 2019.
There is still a logjam however, with 650,000 homes currently in the pipeline and changing hands. This is unchanged from last month due to strong sales agreed for this time of year. Rightmove aims to complete the sales before 31 March so the properties qualify for stamp duty savings.
The listing site expects a slower second quarter once the stamp duty holiday ends.
But, even with the average house price in Britain up by 6.6% in 2020, cheap mortgage rates that are available for some people leave scope for further modest price growth despite the loss of the tax saving.
Watch: What do stamp duty cuts mean for buyers and house prices?
All regions across the UK have seen far greater average price increases than the average savings in stamp duty, indicating affordability headroom.
Rural, countryside, and coastal demand is expected to “remain high for those re-appraising their lifestyle, but more normality will also help the recovery of those aspects of city-living that have seen a dip in their appeal,” said Tim Bannister, Rightmove’s director of property data.
While this year has been marred by coronavirus-related uncertainties, Brexit uncertainties have plagued the property market for far longer. Record activity month after month has proved that movers are willing and able to act on their new or existing housing priorities, Rightmove said.
So far, demand has exceeded supply in 2020 with the number of homes coming to market for the year to date down by 0.6% on the same period in 2019, and the number of sales agreed up by 8.3%. As a consequence the number of available properties for sale is at a record low. This indicates that there is scope for some further modest price increases overall in 2021 despite uncertainties.
Bannister added: “Despite these headwinds, ongoing demand still remains very high, indicating that there’s plenty of fuel left in the tank for the housing market. Interest rates remain at near-record lows, and we expect greater availability of low-deposit mortgages at competitive rates next year.
“These two factors will help to oil the wheels for home purchases by the ‘accidental savers’ who have collectively saved £100bn that they couldn’t spend during the pandemic restrictions.
“With the expectation of a return to more normality in the second half of 2021 and a likely ‘fresh start’ mentality for some, there are sound reasons for continued positive market sentiment that will outweigh the economic, political, and health challenges ahead.”
Similarly, Marc von Grundherr, director of Benham and Reeves expects to see “this tidal wave of market momentum spill over into next year and keep the market buoyant” as homebuyers race against the clock before Rishi Sunak’s stamp duty holiday ends.
It comes after Halifax data showed last week showed the biggest five-month increases in property prices since 2004, with average sale prices rising by £3,000 between October and November alone.
Halifax figures showed the average UK property sold last month was bought for £253,243 ($336,195). This means a 1.2% jump on October prices and a 7.6% increase year-on-year — the biggest annual jump since June 2016.
Property listings site Zoopla has previously made similar predictions, with a lack of supply limiting buyers’ ability to negotiate down prices even as they face higher taxes.
Watch: Why are house prices rising during a recession?