While 2020 will remain one of the most economically-turbulent years on record, the UK’s property sector showed resilience against the turmoil, ending the year with record-high house prices. At slightly more than £250,000, the average house sold for £14,000 more than in the previous year. The stamp duty holiday announced during the year to cushion the housing market from the pandemic’s effects had a prominent role in this development. Still, few could have predicted the positive growth witnessed during 2020.
Against the backdrop of the coronavirus pandemic, it is hard for property experts to gauge how the property market will fare in 2021. The house price increase witnessed in 2020 might not carry over into 2021, especially as the stamp duty holiday may come to an end, and there’s little knowledge of how much longer the pandemic will last or how effective vaccines will be. How the global economy rebounds will also be a factor that influences the UK housing market.
Like many property investors, Zuneth Sattar is keen to see how the housing sector performs in a year where more progress dealing with the pandemic is expected. Mr Sattar began his property interests in the residential sector, and it remains a large part of his business as he continually adds to his portfolio.
The Stamp Duty Effect
The stamp duty holiday was initially scheduled to end on the 31st March 2021, but Chancellor Rishi Sunak announced a further extension until the end of June. After that, the nil rate band will start at £250,000 for three months before returning to the pre-pandemic level of £125,000 from October 2021. While addressing Members of Parliament, Mr Sunak said the extension and three-month taper afterwards were to help ease the transition back to standard rates. For home buyers and sellers, the extension is undoubtedly a relief.
Without an extension, some property experts feared the housing market would experience a crashing halt, with prices feeling downward pressure and transaction levels falling below normal levels. Solicitors and conveyancers might ultimately see a drop in demand once the tax break ends, while sale collapses could occur in the weeks approaching the deadline. In reality, however, the Chancellor’s transition period will likely ease the pressure on demand and prices.
Across the major UK cities, rents in residential properties have fallen noticeably, with the most pronounced impact felt in London. This is understandable, as the capital has been the UK city most exposed to the demand shock resulting from the pandemic. However, even cities such as Edinburgh, Leeds, Manchester and Reading have not been spared from falling rents, as demand for accommodation within town centres has been weak.
The fall in rent levels across the country come against a backdrop of significant changes within the affected cities, as the pandemic affected many people’s financial status and working patterns. With foreign travel also limited for most of 2020, tourists, international students and workers have also been unable to access the UK, reducing the demand for accommodation from these groups. Additionally, work from home arrangements have led others to consider relocating further outside busy city centres, either temporarily or permanently.
A Better Future?
Various industry experts have made projections for how 2021 will play out in terms of the housing market. Soon after a new national lockdown was announced in early 2021, estate agent chain Knight Frank foresaw house prices remaining flat for the rest of the year and rebounding in 2022 with a three percent growth.
Savills initially conveyed a similar sentiment but has since upgraded its forecasts to show an anticipated four percent rise in 2021 and a cumulative 21.1 percent residential property price growth by the end of 2025. In changing its outlook, Savills noted the speed of vaccinations, government support for the housing market, and the gradual easing of social distancing measures as vital factors to economic recovery.