Trying to work out what’s going to happen in 2021 isn’t easy, there are so many variables in play, including, how fast ‘we’ can vaccinate the nation. Trying to forecast how a market will perform during a ‘once in 100-year event’ is, to be honest, anyone’s guess!
There are however two reports that stand out this month in terms of understanding ‘what might happen next’ for those that are having to plan moving forward. The first is from Reallymoving, which uses its quote system to forecast what will happen to house prices moving forward.
Will prices struggle to stay positive in early 2021?
Reallymoving captures the purchase price buyers have agreed to pay when they search for conveyancing quotes through the comparison site, typically 12 weeks before they complete. This enables Reallymoving to provide fairly accurate three-month house price forecasts which track the Land Registry’s price paid data.
And, like many forecasters, they are predicting average prices will fall with “negative growth of -1.2% in January and -2.5% in February 2021”. On a regional basis, this average ranges from 5.4% growth in the North East through to falls of -7% in the East Midlands.
One of the other points Reallymoving raise is that the First Time Buyer share of activity has fallen by 12% from July- December 2020 vs 2019. And this is an interesting stat, as if smaller LTVs come back at the start of the year, this could well help to boost activity throughout the year, with pent up demand from this year coming back into the market which isn’t affected by the stamp duty deadline – for most FTBs.
What’s important to bear in mind is that if prices are reported to start falling in the first quarter versus the previous year, this may reduce demand and supply for Q2, on top of the reduction if we end up with the stamp duty ‘cliff edge’ at the end of March.
What will happen if the Stamp Duty holiday isn’t extended?
Zoopla’s monthly report highlights individually the impact of significant events which will influence sales and prices by quarter for 2021.
In summary, Zoopla looks at the impact of the positives on the market, which include: the vaccine, the return of low LTVs boosting pent up demand from 2020, the lack of forced sales due to a lack of repossessions, the fact that price rises were limited going into the pandemic coupled with low stock levels.
Their view is that this will help to support prices and transaction levels especially as “lifestyle changes and evolved working practices” will mean people continue to revaluate where and how they live in the future. They believe that “just over 50% of sales agreed in January will make it” before the stamp duty deadline ends and that the ‘cliff edge’ may reduce sales’ completions in Q2 to “20-30% below normal levels over Q2 2020, ending up with sales being 10% below 2019 levels by the year end.”
Overall, in “2021 they expect just 4.5% of homes to transact, compared to a 60-year average of 7% and a high of 12% in 1988 (a homeowner moving every 8 years)” explaining that “a combination of demographic, social, policy and economic factors have all acted to reduce the liquidity of the housing market to a level that can’t go much lower”.
What’s important to hold onto, is whether we do slightly less business in 2020 at slightly lower price levels, this in itself would be a great result for the property market, suggesting that the influence of ‘uncertainty’ driving the market up and down, may not be something that is so sensitive in the future. Not the end of ‘boom and bust’ of course, but perhaps less highs and lows!