It’s going to be a very interesting year for the property market and whilst there may be some difficulties ahead, we may need to look more positively on what’s past, and take advantage of the power that positive sentiment amongst buyers and sellers can bring to the housing market this year. Our Sales Director Tony Wing takes a look at these matters in more detail.
2020 was a year of towering contrasts for the housing market. After a strong start in January/February, the market was then dominated by the impact of Covid, as was every other aspect of our lives. According to the Halifax, house prices were down by 0.5% at the mid-year turn, with the imposition of Lockdown 0.1 seeing the market effectively grind to a halt.
However, when the market reopened, limited supply in conjunction with the force of pent-up demand lit the fire under what must be seen as a most remarkable recovery, thanks to buyers' lockdown re-evaluations of their future housing requirements and the added fuel to the fire of the governments time-limited incentive of a stamp duty holiday. The Halifax reported that average house prices were 6.0% higher at the end of 2020 when compared to December 2019.
So straight into 2021 we went, and unfortunately, straight into Lockdown 0.3! A new covid variant is playing hell with our lives and whilst the English housing market remains open for business, with all the necessary covid health and safety protocols in place, we are hearing reports from some agents that they are now seeing a significant drop in market activity. There is an understandable reluctance amongst potential buyers to leave their homes, even if there is consent to go house hunting without a fine.
And now the housing market and the economy face a series of deadlines/obstacles to overcome in the coming months ahead:
- Getting a huge bottleneck of sales through to completion before the end of the Stamp Duty Holiday on the 31st March.
- Significant changes to the ‘Help To Buy Scheme’, which has assisted so many first time buyers in take their first step onto the housing market ladder, post the 31st March.
- The end of existing employment Furlough Schemes on the 30th April.
- A Chancellors Spring Budget. What is he going to wave his magic wand at in order to get the money he needs - Capital Gains Tax?
- A struggling economy and significantly higher levels of unemployment.
The Halifax, the UK's largest mortgage lender, has commented that with the pace of the UK’s economic recovery expected to be constrained by this renewed national lockdown, and unemployment widely predicted to rise in the coming months, downward pressure on house prices remains likely as we move through 2021.
So do we feel it is all doom, gloom and disaster for the UK housing market, looking at the nightmare list above? You may be surprised to hear, the answer is no! So let’s look at the reasons why we should possible take a more positive attitude towards what’s past and what may be ahead.
- 2020 should have been absolutely cataclysmic for the housing market – but it wasn’t! Last year’s remarkable market recovery/mini-boom provides a good starting point for the market in 2021, to cope as well as it can with any troubles that may lay ahead.
- There is a lot for all homeowners to be very grateful for. Without a furlough scheme and other assistance, there could have been an even more dramatic collapse in businesses, unheard-of levels of unemployment and hardship, tens of thousands of families unable to pay their mortgages and losing their homes, and long term issues of negative equity with house prices falling through the floor. It did not happen. So, look how fortunate we are!
- All the key economic fundamentals needed to help maintain a relatively stable housing market in difficult times, remain in place; a shortage of housing in the market, for which there remains an underlying relatively high level of demand and low-interest rates.
- The British public’s power of positive sentiment! Whilst there is a genuine risk of the price gains from 2020 coming under pressure, the level of any house price falls is likely to be tempered by what could be a significant boost in consumer confidence in the housing market by the successful roll-out of the vaccination programme. It was the power of positive sentiment in the face of adversity which backed the market recovery last year. It could happen again in 2021. People are now already planning ahead for post-vaccination life. For example, in the holiday industry, TUI, the UK's largest holiday tour operator, says 50% of bookings on their website are currently by over-50s.
- Property pundits are forecasting a market recovery in the latter part of the year when we start to see growth in employment levels once more and an economy adjusted to covid-circumstances and the world post-Brexit.
It’s going to be an interesting ride for the property market over the many hurdles it will have to face in 2021. It’s not going to be easy, or without incident, but crucially with buyers and sellers power of positive sentiment, continued low-interest rates, and a good level of underlining demand still waiting to come out, the year may yet offer up some positive surprises? We shall see.
Tony Wing DipSurv MRICS FNAEA