It’s the question that everyone is asking, tricky to debate and will be even more interesting to see unfold. Read on as MSP Capital’s Valuation surveyor Chris Wright shares his thoughts …
It feels to me though that this year could be that little bit harder to predict than most. Trying to forecast future house prices, particularly during these challenging and uncertain times is in one sense tricky but in other ways we all know that many opportunities can be found and created in the midst of chaos. So I’m going to dive in anyway as Covid-19 impact on the housing market so far appears to be having limited effect.
As the virus first hit us back in early 2020 and we entered into our first national lockdown, I doubt there were many of us who would have predicted the residential property market booming, with house prices ending up 6% higher in December compared to one year prior, and indeed the average price of a house reaching a new record high according to Halifax reports.
If we now look back at what drove this growth, we can point to a number of factors such as the stamp duty holiday, and after the lifting of lockdown restrictions prompting a surge in demand. This demand seemed to be largely driven from those city workers looking to escape to the country, as there was a shift away from office working to remote-working. This provided opportunities to relocate further afield and move to a property with access to outdoor space, a much desired commodity having been locked-up in our own four walls for most of the year.
Looking ahead though, in reviewing what the mainstream market predictors are anticipating, Halifax for example, forecast that values will drop in 2021, a prediction that currently seems to be shared among industry professionals including Nationwide and Rightmove. The Halifax cited that there are already signs of the market slowing – although house prices rose by 0.2% from November-December, this was the slowest monthly rise over the last six months. Was this a Christmas lull or will this pick up again and surge?
Savills have suggested that 2021 will be a “year of three parts” for UK house prices. Although they pointed to the now secured EU trade deal reducing some of the risk to the housing market, they still forecast that net house price growth in 2021 will be close to zero. However, they were keen to point out that there are many factors that could sway property values throughout the year.
For instance, although the stamp duty holiday is due to end on the 31st March 2021, there appears to be ever-growing pressure on the chancellor Rishi Sunak to extend the tax break or provide transitional relief. In addition, the on-going lockdown continues to have an affect on people’s desire to move, although other factors such as household finances, and the speed of the vaccination programme will also likely impact on the housing market. Perhaps the psychological effect of the third national lockdown is that it will positively affirm people’s wishes to move and ensure that their living space suits their needs. What issues were swept under the rug previously have now been firmly aired! Let’s hope that they find their happiness in the new projects underway across the country created by some of the most talented architects and developers to meet the new needs of space and nature.
From this perspective, most commentators widely agree that the first quarter of 2021 is going to remain resilient as many look to beat the stamp duty deadline of 31 March, thus helping to sustain the UK housing market.
The challenges ahead.
Unemployment is forecast to rise to 7.5% this year, from a current rate of 4.8%. With the Government’s furlough scheme ending in April, there are predictions that some 2.6 million people could be unemployed by mid-year. This combined with an economic downturn is why many believe there will be a break in activity that could lead to house price volatility, although the market for higher-end homes maybe more insulated against these factors.
Much of this will though depend on the speed of the vaccine roll out and whether the Government will, or indeed can, intervene to provide further stimulus to the UK housing market.
In summary then, nobody has yet managed to find the allusive magic crystal ball to predict the future. What we at MSP Capital continue to see at this time though, is an ever increasing demand for development finance and thus an appetite from developers on the south coast to build. Furthermore, sales volumes of completed stock continue to remain strong, so we of course all hope that this continues through 2021 and beyond.
One element that’s worth mentioning as well right now is that due to our news sources we have access to the latest stats for developers to find new prospects and opportunities. We love writing the newsletter and communicating with you all each month, but we know that sometimes you might need the information quicker than that to base your decisions on. To that end, one of our 2021 commitments it to share information via twitter. It’s immediate and we’ve loved connecting with followers on there to share news, reviews and tips, particularly for helpful apps that can save time and stress. So click on @MSP_Capital to follow us on Twitter and on Linked In. We’ll keep you updated where we can.
Until next month, Chris.