When the Coronavirus pandemic struck in March 2020, there was a huge amount of panic across every sector with millions of people suddenly having to work at home or being put on furlough, with confusion and fear about how the country and the world would be affected. Now, almost a year on, we’re still living under the effects of the virus and have adapted ourselves to be able to move forward, but for homeowners, the burning question remains – what are the housing market predictions for 2021?
How did the housing market change in 2020?
During the first lockdown, the property market came to a halt which created a lot of worry for homeowners as it meant that any plans to buy and sell were being delayed with no confirmation of when the market would be allowed to open once again. After 7 weeks, the government gave the go-ahead for the property market to reopen under strict rules, with the way that we buy and sell completely changed.
With homeowners able to move forward with their sales again, these new restrictions gave us the development of virtual viewings, allowing potential buyers to see a house on a video tour to reduce contact and limit the risk of spreading the virus around several house viewings. We’ve got more information about them here in our article, how are house viewings turning virtual?
Experts warned homeowners of the repercussions of the lockdown in the property market and their fears of house prices dropping at the end of 2020, and all we could do was wait and see what the after-effects would be.
Why did house prices not drop as steeply as expected?
The predictions were varied, with some experts foreseeing drops by as much as 20% in property value, but so far, we haven’t seen this extreme a drop.
One of the main reasons the property market managed to bounce back the way it did after the lockdown is due to the stamp duty holiday which was declared in July 2020. This stamp duty holiday meant that buyers could save as much as £15,000, encouraging anyone who was looking to either sell and move on or to take their first step onto the property ladder in the next few years to bring it forward. We covered this in more detail in our article What do the stamp duty changes mean for me?
This increase movement in the market contributed to keeping prices up, as there was plenty of activity to keep houses selling and being bought to rectify some of the damage that would have come after the 7-week pause.
Will prices stay steady now?
Having managed to stay steady as we entered 2021, where the more intense decreases were expected to hit, some homeowners are hopeful that we’ve managed to avoid these drops and that their house value will be fine – especially with house prices increasing slightly in November 2020.
However, in the coming months we are going to see two big factors that have contributed to house prices staying level start to change, which could tip the scale and start the descent of house value – the end of the stamp duty holiday, and the end of the furlough scheme.
The stamp duty holiday has encouraged thousands of homeowners to move forward with their purchases and kept the housing market steady, however, when this ends it’s expected that the market will slow down. Only a month after this, the furlough scheme is due to end as well which is helping millions of people across the country with their income, and this ending will have negative impacts across all sectors.
Why will these events ending affect the housing market so intensely?
The end of the stamp duty holiday will likely result in a decrease of people buying and selling – those who were looking to buy and sell in the next year or so did everything they could to bring those plans forward to be able to benefit from the holiday. Buying a house is one of the biggest purchases that we make and isn’t a regular purchase for most people, so it’s likely to see a reduction in the amount of people looking to buy going forwards as the majority of those interested in moving have done so or are already in the process.
On top of this, with the furlough scheme ending, a lot of peoples’ finances will be tighter than ever and big purchases like property will be the last thing on their minds. Furlough has been extended a few times, however, so far, the government have not announced any further extensions for the deadline that is approaching in April.
How much will house prices drop?
Experts are currently warning of 5% price decreases in property value, which could potentially drop lower depending on how the economy handles the third lockdown which has currently not got an end date. House prices are difficult to predict and as we saw last year, can withstand a huge amount of pressure, but with the support that has been keeping prices steady coming to an end it’s widely expected for decreases to start occurring.
Have I still got time to sell before the end of the stamp duty holiday and furlough?
Selling on the open market can take over 6 months, which is not fast enough to benefit from the stamp duty holiday. Thankfully, there are other selling methods that homeowners can use to achieve a quicker sale and save some money in the process. We Buy Any House are able to provide a free cash offer and buy your house in as little as 7 days, letting you benefit from the stamp duty holiday before it ends. You can speak to one of our property specialists today to find out more!