With 2020 behind us, it’s time to look to what 2021 will hold for the UK property market. As property investors and developers think over the future of their business, it’s time to answer the pounding questions on their mind about the possible state of the 2021 property market.
As we enter the new year with yet another national lockdown, it will come as no surprise that the UK property market will also bear some resemblance to March 2020. Tom Bill, head of UK residential research at Knight Frank commented that “it is fair to assume that the first four months of 2021 will bear little resemblance to the rest of the year. Such a diverse range of factors will pull the UK property market in different directions early next year that buyers and sellers are likely to respond in an equally wide-ranging way.”
Beyond these first four months of 2021, there is uncertainty, but also potential, for the UK property market. Therefore, the question on everyone’s mind is what exactly will a post-Covid property market look like? Frank argues that “any useful assessment of what comes next can take place later in the year. The autumn selling season will provide early clues to what the post-Covid ‘normal’ looks like.”
So what factors can affect the UK property market in 2021?
For starters, the government’s furlough scheme and stamp duty holiday are due to end in April and March respectively. The impact this will have on the economy as a whole is still up for debate, as the position we will be in regarding controlling COVID-19 is still uncertain. While the end of the furlough scheme is likely to leave some in a worse position than when their pay was guaranteed, we predict it won’t affect the property market hugely. Any issues the end of this scheme causes for the economy won’t have a damaging knock-on effect on the population’s overall ability and desire to purchase homes.
Furthermore, many people tried to ‘escape to the country’ at the end of 2020, with data suggesting that this desire will live on in 2021 despite the new vaccine programme. The impact of 12 months of lockdowns and restrictions will play a huge part in future home buyer’s purchases, dictating the type of life they want to live.
With the stamp duty holiday set to end too, there will be an introduction of a 2% surcharge. But is this likely to affect the UK property market? More so than the end of furlough. With the stamp duty holiday, people on average were able to make a saving of £15,000. As a result, the surcharge is likely to become a negotiating tool by international buyers in Q2 this year.
Something important to consider as we head into 2021 is the impact of the Prime Minister’s promise to support first-time buyers seeking 95% mortgages. After the onset of Covid-19 in the UK, 95% and many 90% mortgages disappeared from banks. Banks no longer felt secure enough to lend this much money during a time of economic uncertainty. And while 90% mortgages have been creeping back into existence, there are still no 95%’s to be seen. The Prime Minister has promised to work with banks to secure these low-deposit mortgages for first-time buyers who need larger loans to secure their first home.
This is good news for property developers and investors looking to sell on property to first-time buyers seeking a starter or forever home. It is predicted that sales will start surge in the first few months of 2021 as people finally head back out into the property market after a break over Christmas. And with this lockdown still allowing the property market to continue as usual, with some restrictions on social distancing and masks for viewings and appointments, nothing hinders the people who have the resources to buy and sell homes.