There has been much speculation over the past few months about just when the current UK house price boom is finally going to end. The by now familiar narrative is that 2021 will start seeing a decline in house prices and a decrease in house sales as people begin losing interest in moving house after the end of the stamp duty holiday in March. Is the latest property market research bearing out this prognosis?
Broadly speaking, yes – but the devil, as ever, is in the detail. According to the latest house price index by Zoopla, the property market will see something of a slowing down in 2021, but this won't happen until much later into the year than has been widely expected. Zoopla have performed a house price analysis using a wide range of aggregated data and macroeconomic trends and conclude that by the end of 2021, house price growth will stand at one per cent on average.
However, this slowing down of house price growth won't happen for quite some time yet – and the first quarter of 2021 will continue to see high levels of house price growth on par with the current four-per-cent rate. Here's how this prognosis translates into concrete consequences if you're planning on buying or selling a house next year.
The stamp duty holiday rush won't end by Christmas
This one will come as a bit of a blow to those buyers who were planning to wait until January in order to avoid the intense competition and huge delays caused by hundreds of thousands of buyers rushing to agree sales before Christmas in order to benefit from the scheme.
With a 100,000 extra house sales projected for agreement in January-March 2021, the market is unlikely to get any less busy any time soon. Of those who agree a sale in those first three months of 2021, only 54 per cent will actually complete in time for benefiting for the stamp duty holiday. So, if you haven't agreed a sale by now, the stamp duty saving will be a bit of a gamble.
Lenders will reintroduce high LTV mortgages – but slowly
One of the more serious consequences of the pandemic and the adjacent property boom has been the withdrawal of the vast majority of high-LTV mortgages deals from the market. This has been ruinous for first-time buyers who have found themselves suddenly needing a 15-per-cent deposit on homes that are now more expensive.
The good news is that, as Zoopla point out, as the house movers attracted by the stamp duty holiday slowly begin to withdraw from the market, lenders will willy-nilly reintroduce the deals that are more attractive to first-time buyers with smaller deposits. However, this is likely to be drip-feed from April 2021 onwards, rather than a wholesale reintroduction overnight:
'A prolonged lack of higher LTV finance would impact housing chains and create further downside risks to the market outlook in 2021. We expect lenders to return to higher LTV lending in 2021 Q1, but not initially at the scale and competitive pricing seen in recent years.'
Local market conditions will continue to override averages
It has ever been thus, but local market conditions will continue to take precedence over average property market trends. So, while the overall slowing down of the housing market by the end of next year is likely to to be true of most place most of the time, regional variations will continue to hold significant sway over local house prices. As Zoopla explain, despite what has been hailed as a boom, house sales have actually contracted to level not far above those of the economic crash of 2008-9; this is a longer-term property market trend that will continue to impact supply and demand chains and house prices:
'Lower market liquidity may well create scarcity which, in turn, supports pricing but it also makes for greater volatility in house prices with more variation in price trends between local markets and within property types.'
In other words, even sellers in boom areas will need to watch the market closely – unless they are lucky enough to own a property type (e.g. Georgian townhouse) that is more or less immune to regional price fluctuations.