The housing market in 2020 was unpredictable at the best of times. With the entire market put ‘on hold’ during the first lockdown, to the stimulus from the Stamp Duty holiday, it was a year of ups and downs difficult to compare to any other.
With the pandemic still dominating the headlines, we look at what 2021 may hold for buyers, sellers and movers.
The Pandemic effect
The way we use our homes has shifted, with them now being the place in which many of us work, relax, eat and even exercise. Demand for property in suburbs and more rural locations has increased, with a shift away from city living. The desire for a bigger footprint of property, along with more green space, have been the driving factors, with many employees expecting to work from home, or have a more hybrid approach to working, for the foreseeable future.
On the flipside of a potential for continuing demand in the mid – higher end of the property market, smaller properties and apartments in urban areas may experience the opposite effect. Employees on lower incomes are more likely to lose their jobs, and in bigger numbers. Investors and landlords may have propped up this end of the market to date due to the Stamp Duty holiday, but with this incentive soon to be removed, demand, and prices, at this end of the market may fall.
At some point, although perhaps not until much later in the year or into next year, there is the looming prospect of tax rises, which may have a detrimental impact on people’s ability to borrow.
The end of the Stamp Duty holiday at the end of March 2021 is set to have a fairly significant impact on transactions. With talk of backlogs in processing mortgages and conveyancing solicitors also struggling with volumes of work, there have been suggestions that the normal ‘6 week’ timeframe quoted for house completions has doubled in some cases. Therefore, purchases that were not agreed before the end of 2020 may now be unlikely to complete in time to take advantage of the Stamp Duty break, with any delays in purchase chains potentially meaning buyers will miss out on the savings.
Some property insiders are indicating that 2021 has already seen a slight cooling off in demand from buyers who may have come to realise that they will be unable to complete before the end of March Stamp Duty cut deadline. In turn, this may have a knock-on effect on house prices, with vendors listing properties or with properties stuck on the market needing to set their price more realistically in order to achieve a sale.
The other potential effect is that chains that some are unable to complete before the end of March deadline collapse. A survey by The Guild of Property Professionals claims that 31% of buyers would pull out of the property they have agreed to buy if they no longer qualified for the Stamp Duty saving.
This may lead to an influx of houses being relisted come April. Sellers may be less likely to achieve the same price considering buyers will potentially have to pay a much higher rate of Stamp Duty, which may again have a knock-on effect on house prices.
New build / property construction
Having initially taken a hit at the start of the pandemic, housebuilding seemed to get back on track towards the end of 2020. Although Brexit may have some impact on sourcing materials, and indeed skilled workers, there is more optimism since the trade deal was announced.
The land market remains competitive and due to the lack of appropriate sites, developers may often target and bid for the same pieces of land. This may impact on the price of new build properties, although developments often still have to include an element of ‘affordable housing’.
Those housebuilders that are signed up to supply housing under the Help to Buy 2021-23 scheme will need to provide housing priced underneath the applicable regional cap.
With the potential for further volatility in the housing market for 2021 and beyond, seeking advice you can trust apply when buying a house is more important now more than at any other time. Appointing a Chartered Surveyor is one of the key factors – so you can be sure you know what you are buying and that the price you have agreed to pay is fair. This also applies when buying a new build property – a Snagging Report undertaken by a Chartered Surveyor can capture the parts of a property that have not been completed to a good standard, reducing the need to try and get these defects sorted yourself once you have moved into your new home.
For more information on any of our services for residential property buyers, including our RICS homebuyer reports, building survey reports, snagging reports for new builds and Help to Buy surveys/valuations, please contact us.