To say that the property market exceeded our expectations this year is an understatement. When the economy started to slow down in the wake of the first lockdown, we expected to see the housing market go the same way, as this is what usually happens in an economic downturn. However, this was a scenario like no other and ever since the housing market re-opened in May, we have seen hiking house prices and a record number of transactions.
However, the real question is whether the market can continue in the same vein as we go into the new year. So far, the strong performance can be attributed to the pent-up demand that built up while the market was closed in the spring and the stamp duty holiday that was introduced in July. As the deadline for the stamp duty holiday edges ever closer and the transactions from the pre-pandemic pent-up demand are now going through, can the housing market remain as robust as it has been?
The early signs certainly look very promising – in their property market index for November, Nationwide found that transactions had increased by 105,600 in October and house prices have seen an annual increase of 6.5% – the highest rate recorded since January 2015. On top of this, they found that mortgage approvals were also at their highest rate since 2007.
Things also seem to be looking fairly positive as we get into the new year. In Savill’s revised House Price Index, it is predicted that house prices throughout the UK will increase by 5% in 2021 alone and will increase by 20.4% in the five-year period between 2020 and 2024.
Predictions from Zoopla were slightly more on the lukewarm side – it is predicted in their data that the high demand that we’re seeing now will spill over into the first quarter of 2021 but will start to die down in the second quarter when the stamp duty charge is reinstated. We will then see a lull within the market until the economy starts to pick up again.
While this wouldn’t be an ideal scenario, it is worth noting that we have recently received some news that has potential to soften the blow of such a situation; it was recently revealed that the first batch of the much-anticipated vaccine has now been approved and can start being rolled out by mid-December, which is a lot sooner than we initially expected. The Health Secretary Matt Hancock said in a statement that this announcement could mean that we will be returning to normality by the Spring which could mean that the economy, and subsequently the property market, will see the benefits.
Of course, we won’t be seeing the economic benefits of the vaccine immediately, as batches will be rolled out gradually and we will need to wait a few months before we see the true economic effect. However, according to Faisal Islam – an economic reporter for the BBC – the news of the vaccine alone could restore confidence in the economy and even minimise job losses.
So, what could this mean for the property market? A new confidence in the economy will mean that we will start to see demand start to creep back up in the market. Afterall, demand was astronomical before the pandemic hit, so this is sure to come back once we get back to a sense of normality.
Overall, we may see peaks and troughs in the market over the next 12 months, but any downtime in the market will be a lot more temporary than we initially thought.
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