What does 2021 look like for the housing market.
We take a look at what 2021 has in store for the Housing Market.
House price growth set to slow in 2021
Average house price growth in Burton rose from 2.9% in September to 3.2% in October, the highest rate of growth in three years. This growth in prices, underpinned by strong demand and activity levels, is expected to continue, and average capital values are forecast to end the year up +4%.
The factors driving the market next year are examined in more detail later in the report. Price growth will slow in all areas in 2021, but according to Zoopla’s current forecasts there are no signs of pricing falling off a ‘cliff-edge’ next year.
Buyers searching for extra space
With all of us having to spend more time at home we have seen a rise in buyers and renters looking for homes with more space ever since lockdown back in March.
We have examined in previous reports the rise in demand for 3-bed, 4-bed and 5-bed homes for sale, how rental houses are being let out more quickly than flats, and how gardens top the list of search terms among those looking to move.
New data shows this trend shows no sign of abating. There has been a rise in the number of searches for keywords which signify extra space in a home. Zoopla’s research grouped together search terms including: ‘Extra room’, ‘Spare room’, ‘Office’ and ’Study’ and found searches had risen 71% in Q3 compared to Q2.
This may well reflect the increased appetite for space in which to work in a new property, given the changes in working from home and differing commuting patterns which have developed during 2020.
Activity down -33.5% in Burton 2020 vs 6% nationally, steady in 2021
Nationally, we expect total transactions this year to be at 1.1m, some 6% lower than last year – underlining the elevated activity levels in the market since the end of the first lockdown. Locally in Burton we have seen a staggering 33.5% fewer transactions over the last 12 months which suggests that more people have decided not to move in Burton during 2020, this could lead to a localised increase in property coming to the market in 2021.
The sales pipeline moving into Christmas is 50% higher than this time last year, so we expect higher levels of transactions moving into Q1 next year. This will offset slightly lower levels of activity in the rest of the year, and so we expect 1.1m sales transactions in 2021. Sales will dip modestly this year, but remain steady in 2021.
Key drivers influencing 2021 market health
1) Vaccine rollout
Progress on COVID-19 vaccines will have a big impact on how quickly key sectors of the economy can open back up. We expect enough progress to have been made by the second half of 2021 for an easing of restrictions and a relative return to normality.
2) The economic outlook
There are some challenges ahead, as the country continues to battle the impacts of the pandemic on the economy and day-to-day life. The impact on the housing market is less than in previous downturns as sales volumes have already fallen in recent years and affordability levels among buyers and renters aren’t over-stretched.
Economic growth should rebound in 2021. This will be helped along by ongoing Government support. The short term extension of furlough and the mortgage payment deferral scheme provides important support for homeowners.
3) The EU trade deal
Negotiations on a trade deal look set to go down to the wire. In the absence of a comprehensive free trade deal, we assume some form of agreement will be struck to keep the flow of goods running. This would, however, have a possible impact on economic growth and trade early in 2021.
Even so, we believe the negative impact is expected to be minimal to the housing market itself and your business should not see a huge negative impact on forecasts because of it. Want to stay up to date with housing market policy changes? Subscribe to the House Price Index Report.
4) High LTV Mortgages
Lenders have reduced the availability of home loans for those with small deposits which is impacting first time buyer (FTB) demand - a key buyer group who accounted for 36% of sales in 2019.
Half of FTBs use loans of 85% loan-to-value (LTV) or more, and reduced mortgage availability is squeezing this group as lenders face major operational challenges from high levels of demand from home-movers. A prolonged lack of higher-LTV finance would impact housing chains and mean further risks to the market outlook 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.
5) Keeping a pulse on mortgage arrears
75% of housing sales are supported by a mortgage. Mortgage payment holidays have been taken up by 1.1 m but a lot came off this after furlough.
Lower borrowing costs suggest borrowers will go after forbearance rather than repossessions, so we don’t expect to see widespread mortgage defaults and forced sales. With that in mind, the impact on pricing will be relatively low.
It makes for an interesting backdrop as corporate investors continue to buy and develop homes for rent and some smaller landlords return to the market, encouraged by the stamp duty holiday.
6) ‘What a home is really worth’
The pandemic has unlocked enormous demand for homes. The ‘once in a lifetime’ reassessment of housing that started in 2020 has further to run when combined with ongoing changes to working patterns for a lot of the population.
If you are thinking of moving in 2021 why not start with getting your home valued – we have three options you can choose from – show me my options
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