The regions playing catch-up will drive price growth in the longer-term.
The pandemic precipitated the deepest recession on record in the second quarter of 2020. But government support schemes have cushioned the blow and we are forecasting a 2.0% rise in house prices for 2020. There has, rightly, been much emphasis on the number of furloughed workers who may lose their jobs. But many homeowners have not been furloughed, or suffered a decline in earnings. They are seizing the opportunity offered by the stamp duty holiday to relocate. The withdrawal of government schemes means that the full impact of the economic damage will not be felt until 2021. Job losses are expected to peak in H1 2021, but the economic recovery ought to be underway. This should stabilise the market in the second half of 2021. Price growth should resume in 2022 and the average house price should have risen by 8.0% in 2024.
LONDON
Early in 2020 confidence was returning in London which had been in the doldrums since the first quarter of 2018. The housing market in the capital bounced back quickly, driven by pent-up demand and people choosing to bring forward a long-planned move. Buyers in London benefit most from the stamp duty holiday. We forecast a 2% rise in London house prices in 2020, but a fall of 1% in 2021. This is based on affordability and the surge in households leaving the capital. By 2024, prices should still be 6.0% higher than today, althoughother regions will perform better. To put this into context, London prices have risen by 53% over the last 10 years - against 23% elsewhere. In prime central London international buyers are scarce and people are moving out in search of green space. As a result, we forecast that the prime central postcodes will underperform the rest of the capital over the next two years. But, gradually, buyers should start to see these neighbourhoods as a great place to live, with real estate that’s good value and also a safe haven asset. We forecast growth of 6.5% over the next four years.