Market insight Focus special
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Focus special

Looking to the year ahead. By Aneisha Beveridge, Head of Research.

In January, the question that almost everyone will ask me is: “So, what’s going to happen to house prices?” But this year, I am also preparing to hear: “Do you think it’s possible that the stamp duty holiday will be extended beyond March 31st”.

In answer to the first question, we will as we always do throughout the year, be keeping a close eye on the housing market and how any changes might impact our forecasts, which we put together in September 2020. Back then we explained that the average price is likely to remain flat in 2021, with small falls in some areas. This assessment was based on the agreement of a Brexit deal, but also on the arrival of vaccines early in 2021 and the ending of the stamp duty holiday as planned in March.

The market seems set to pause for breath after 2020, an extraordinary year when as many as one million homes are likely to have been sold. This was despite the economic ravages of the pandemic and the temporary closure of the market.

What would be the result if Rishi Sunak, the chancellor, opted to keep the stamp duty holiday in place until the end of year? Such a decision would be welcome news for the buyers who may narrowly miss the deadline as the result of legal and other delays that have been causing some deals to stall.

In the event of a change of heart on the part of Chancellor Sunak, we would expect slightly stronger house price growth, particularly in London and the South.


First-time buyers and second-steppers in more expensive parts of the country in particular would be able to contemplate a purchase thanks to the tax savings and hopefully a return in higher loan to- value mortgages as the economy recovers towards the end of the year. We also think that around 10%, or 100,000, more homes could be sold, returning transaction numbers to their 2016 levels. But economic weakness and mortgage rationing will still serve to keep a cap on the numbers.

If Sunak does not relent, and the stamp duty holiday ends, as currently planned, its removal will also coincide with a number of other key deadlines. The furlough scheme is also due to be withdrawn at the end of April and unemployment is expected to peak thereafter. These factors will, obviously, weaken sentiment and activity in the market.

However, the arrival of the vaccines should aid the recovery – and, for the second half of 2021, we are forecasting an economic pick-up and more availability of higher loan-to-value mortgages.

In the prime markets, the fate of the stamp duty holiday will be less of a concern since the tax savings make up a smaller share of the typical property’s price. Also, the affluent are eligible for the best mortgage deals because they have cash or equity.

Even if travel restrictions are loosened, international buyers face the introduction of the 2% surcharge in April. But this extra tax may be counteracted by sterling’s weakness, which will continue to make UK property appear an attractive proposition.

Whatever unfolds in 2021, we will still be talking about what happened in the market in 2020. Last September, two months after the surprise announcement of the stamp holiday, we forecast that overall growth for the year would be 2%. We now expect that the final figure may be higher, given that the demand for relocation continued almost unabated to the end of the year.

This demand was immediately evident in May when the market re-opened. The first lockdown, which lasted seven long weeks, had forced people to consider what they really wanted from a home. Most concluded that they wanted more space for home working and a larger garden. Some immediately acted to achieve that goal. Others who were planning to move sometime in the future started viewing potential properties when the stamp duty holiday was announced.

However, not everyone was able to start the search for more space given the economic uncertainty. Therefore the arrival of a vaccine does not necessarilymean the end of this trend. In 2020, the market was driven by wealthy homeowners whose jobs were largely unaffected by the economic crisis.

First-time buyers and second-steppers were held back by unemployment fears and the rationing of high loan-to-value mortgages. In 2021 all eyes will be on Chancellor Sunak’s policies for jobs, and also on the progress towards those 95% state-backed loans promised by the Prime Minister.

But if we’ve learnt anything from 2020, it’s to expect the unexpected.

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Market Insight Winter 2021

Market Insight Winter 2021
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