In a year which has seemed almost bereft of any positives, there has been one obvious bright spark, and it’s coming from an unlikely source – the UK property market. At the end of 2020, Nationwide’s data has shown that house price growth has reached a six-year high, up by 7.3% this year alone.
If you read many property experts cast-iron UK property market predictions in the first quarter of 2020, you’d be forgiven for thinking that the market was at the edge of a precipice. Falls in prices of 20% and in some cases even larger falls were predicted by analysts and experts, but as 2020 draws to a close, it’s clear they couldn’t have been more wrong.
Throughout the second half of 2020, the words mini-boom and even boom have been bandied around in relation to the property market. The reason for this renewed interest in property can be put down to a few key factors:
- A release of existing demand following the closure of the property market.
- A reevaluation of lifestyles and seeking ‘greener pastures.’
- The UK government stamp duty holiday.
None of us wrtiting about property cannot ignore the fact that many of the experts from government departments, TV shows and major financial institutions were wildly off the mark. Even with the green shoots starting to peep through, some property experts were still putting this down to a blip and tried to safeguard their reputations by simply watering down their predictions of a fall. The simple fact is that annual house price growth was up by more than seven per cent and the ‘so-called’ experts were wrong.
Commenting on the figures, Robert Gardner, Nationwide’s Chief Economist, said: “Annual house price growth accelerated further in December, reaching a six-year high of 7.3%, up from 6.5% in the previous month. Prices rose by 0.8% month-on-month, after taking account of seasonal effects, following a 0.9% rise in November. House prices ended the year 5.3% above the level prevailing in March when the pandemic struck the UK.
“The resilience seen in recent quarters seemed unlikely at the start of the pandemic. Indeed, housing market activity almost ground to a complete halt during the first lockdown as the wider economy shrank by an unprecedented 26%.
“But, since then, housing demand has been buoyed by a raft of policy measures and changing preferences in the wake of the pandemic.”
‘Any opportunity to save a pound or two’.
Most Brits will grab an opportunity to spend some money if they feel it is a bargain. One of the biggest lures for property buyers in 2020 was the UK government’s stamp duty holiday. For many, the thought of saving thousands of pounds in tax proved to be an opportunity not to be missed. However, all might not be as it seems.
The 7.3% increase in property prices this year has all but wiped out the stamp duty land tax saving. Those purchasing a property in the latter part of 2019 would likely have gotten a better overall property deal even though they paid the full amount of stamp duty land tax!
What the immediate future holds for the UK property market is rather tricky to predict. Will prices continue to rise, or will there be a pull-back?
On this, Robert commented: “The outlook remains highly uncertain. Much will depend on how the pandemic and the measures to contain it evolve as well as the efficacy of policy measures implemented to limit the damage to the wider economy.
“Behavioural shifts as a result of Covid-19 may continue to provide support for housing market activity, while the stamp duty holiday will continue to provide a near-term boost by bringing forward home moves.
“However, housing market activity is likely to slow in the coming quarters, perhaps sharply, if the labour market weakens as most analysts expect, especially once the stamp duty holiday expires at the end of March.”
Will the price rise trend continue in 2021?
Many property pundits are expecting a rise in prices over the next 12 months. With a Brexit deal done and dusted, many jitters will have been eased. Whether prices will rise by 4% or more as many have predicted is a little tough to envisage. The pandemic is still here and is continuing to cause chaos, and rising unemployment numbers will also be a significant factor. If the vaccine rollout doesn’t keep to its slightly optimistic timescale, things will continue to feel like groundhog day and a feeling of malaise will build..
What’s my prediction?
At best I can see a 1-2% rise in prices, but it could quite easily go the other way. There is likely to be a noticeable pull-back the closer we get to the ending of the stamp duty holiday, and if more bad news was to follow, we could well see a fall of at least couple of per cent or even more.
Read more property-related articles, news and guides in our dedicated section here.