Against all odds, the UK has experienced nothing short of a mini property boom during the Covid-19 pandemic. Although all forecasts were pointing towards a crash following the first lockdown, the opposite has occurred. With Zoopla reporting the volume of sales being 38% higher than the year before, to the average UK property sale price jumping to £253,374, there’s no doubt that the market has entirely defied expectations. But now that we’re firmly in 2021, what are the predictions for the year ahead?
Stamp Duty Holiday
All eyes are on Chancellor Rishi Sunak and what his next move will be regarding the stamp duty holiday. This tax break exemption period has been in place since mid-July 2020 and is expected to end on 31st March, 2021. The stamp duty holiday has been largely credited with creating a flurry of market activity, not least because buyers can save up to £15,000 from their tax bill. Halifax reports that this initiative helped house prices to rise by 6% during 2020. But with huge backlogs reported in the process, including mortgage applications, local authority searches and conveyancer workloads, it is estimated that 100,000 property sales will fall through if they fail to complete before the deadline.
Will the Chancellor extend the holiday for a few months to keep buyers motivated, which would arguably keep property prices high? Or might he at least honour the sales that are already Sold STC and in progress with a phased-out approach to the expiry date.
If the holiday really does end firmly at the end of March, then a crash is likely, particularly if this roughly coincides with the conclusion of the paid furlough scheme at the end of April, although this may possibly be extended too.
Estate agents in Romford explain that the property market is always sensitive to the global economy, and it’s undeniable that the Covid-19 pandemic has had a significant impact on it. During 2021, we can expect to notice market fluctuations based around factors such as how long the third lockdown lasts, the success of the vaccine rollout and of course, the burning question: how much longer will the pandemic rage on?
It’s reasonable to predict that the longer Covid-19 is devastating the UK economy, the more likely that property prices will decline throughout 2021. But with the government committed to propping up the economy, and even the banks joining in with mortgage holidays, it’s possible that prices may just level off this year, rather than experiencing a fall.
Mortgage Products Returning To The Market
One of the best pieces of news for the industry, is the return of 10% deposit mortgages for first-time buyers. Prior to the first lockdown, there were 779 of these products available, but this plummeted to just 44 still on the shelves in early September. First-time buyers were facing an impossible task of saving a deposit of 15% or more to get a mortgage, at the same time that property prices have been increasing. They will welcome the news that there are now 197 10% deposit products up for grabs, with more likely to appear in the coming weeks. Better yet, experts predict that interest rates on these mortgages will start to drop too.
So, will 2021 be the year of the slump, the levelling off, or will it continue to gain pace as buyers crave a change of living space, fuelled by the impact of the pandemic? It will be worth watching Rishi Sunak’s UK budget on 3rd March to gain an idea of what’s coming next!