House prices will drop by nearly 14% once the ‘transitory and temporary’ measures within the housing market and economy are removed over the coming months, a leading economic research body has predicted.
These measures include the ending of both the stamp duty holiday, furlough scheme and pent up property demand, plus the expected post-Covid economic downturn.
The respected Centre for Economic and Business Research (CEBR) whose reports are pored over by politicians including Rishi Sunak, says the ending of chancellors’ £3.8 billion stamp duty holiday is likely to be the most significant reason why house prices will slide so dramatically.
For example, Carter Jonas says that across its branch network the stamp duty holiday has ushered in weeks of strong demand, increased supply levels and higher-than-expected sales, with its southern offices recording a 51% increase in enqjuiries.
stamp duty cut
The CEBR says: “We estimate that July’s stamp duty cut will have brought about a 1.2% increase in average prices and a 6.0% rise in the number of transactions compared with what otherwise might have happened,” its says.
“The temporary nature of the tax reduction means that the policy’s short term effects could be even more dramatic, as people rush to complete transactions before the return to the previous stamp duty regime at the end of March 2021.”
CEBR also estimates that a pent-up demand of some 150,000 delayed sales is currently pumping through the housing market, and that house prices are rising because buyer demand has rebounded faster than supply.
“Our analysis suggests that prices will start to fall significantly towards the end of the year and the first half of 2021 (though there might be a short spike as the stamp duty reduction comes to an end), with average house prices forecast to be 13.8% lower in 2021 than in 2020,” the CEBR predicts.