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House Prices Continue to Inflate
House prices in the UK have jumped to 3.5%, the highest for almost 3 years. Prices continue to inflate as demand remains high across the region. If we look at the breakdown in the map below. House price growth is over 4% in the regions of North West, Wales, Yorkshire and the Humber, and the East Midlands. In addition, cities across the UK are recording higher growth rates than last year. Nottingham and Manchester stand with annual price inflation of over 5%.
A Seasonal Spike in Demand Predicted in 2021
The number of sales agreed has also increased due to sufficient supply. This marks a 38% increase in comparison to 2019. Buyers continue to take advantage of the stamp duty holiday which ends 31 March 2021. Therefore, a seasonal spike in demand is predicted in January 2021, as households work towards completing the sale. In comparison to May, demand for properties has eased. However, it is still a staggering 34% higher than last year.
The housing market plays a crucial part in the economy, as we have seen during the pandemic. The national lockdowns have reinforced the importance of homes for individuals. With many reprioritising their home requirements (home offices, larger outdoor spaces). We will see this trend transition to 2021, resulting in the continued growth of the market.
There are several factors that will shape the housing market next year along with the uncertainty due to the pandemic.
The Most-Awaited Vaccine
The Medicines and Healthcare products Regulatory Agency (MHRA), is monitoring each stage of vaccine development. The vaccine has been tested on thousands of volunteers with no serious side effects reported. The World Health Organisation (WHO), estimate the vaccine could be delivered early to mid-2021. With continued progress, we are one step closer to eased lockdown restrictions. Therefore, activity in the economy can resume, increasing market growth.
As we transition into 2021, the economy is set to recover and is supported by many Government Schemes. As the unemployment rate increases rapidly towards 6.5%, we expect this to impact the levels of purchase activity over the year.
The Brexit Era
On 31 December, the post-Brexit transition period ends, with or without a free trade deal with the EU. Regardless of the deal, the negotiation will impact the economy. The property market often reflects what’s happening in the wider economy. With Coronavirus in the mix, it is uncertain how this will impact the market early next year. Nevertheless, the market has shown significant resiliency throughout the pandemic.
The Return of High Loan-to-Value Mortgages
First-time buyers with small deposits face difficulty in receiving a home loan. 50% of aspiring homeowners use loans of 85% loan to value (LTV) or more. However, lenders are expected to return to higher LTV lending in Q1 of next year.
A Change in Policy
As the economy continues to fall into record-breaking debt, taxes are forecasted to rise. This will impact household finances as the Government looks to reduce the debt over the coming years. Before the change comes into place, there will be a boost to the housing supply.
Evolved Working Environments
Working patterns will continue to change as we transition into January. From the end of the lockdown, new tiered regulations, and a vaccine are on the horizon. It is worth noting, many have realised work productivity has not decreased with working-from-home. Could this be the future for some businesses? As many continue home-working, we predict this will support house sales in 2021.
Housing as a store of wealth, an ageing population and faster growth in older, single person households will all act to shape how the market evolves in the years ahead. New challenges lie ahead, not least the green energy and low carbon agenda which will be the next big policy impact on the housing market.
While the COVID-19 pandemic may have created a lifetime revaluation of housing, more and faster change will only add to the complexity of how households evaluate their housing requirement, now and into the future. – Zoopla
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