Published: 14/02/2021 By Gillian BodenWhat does 2021 hold for the property market?
We may well be in for a slow period over the next few months but there’s good reason to expect and prepare for an upturn in the second half of 2021.
Let’s look at the Influencing factors:
Continuing low interest rates and cheap borrowing – cheap finance underpins & encourages activity in the property market.
“Pent up demand” as a result of lockdowns for almost a year. Brits have built up high levels of savings – an astonishing £250 billion in savings over the past year equivalent to 20% of what households spend in a normal year. Although the property market has remained open there’s no doubt that the lockdowns will have put many people off the idea of moving home. As lockdown is lifted these would-be buyers may be attracted to invest their increased savings in the property market.
Optimism for the economy fuelled by the vaccine roll out. Now over 15 m vaccinated, all adults over 50 should be vaccinated by end of April, encouraging people to plan a return to normal life.
Possibility of an extension of the stamp duty holiday. A zero stamp duty charged on purchases up to £500,000. This has boosted the sales market and caused a boom in property transactions and values.
There is a vocal campaign to extend the stamp duty holiday beyond the current end date of 31 March 2021. I think it’s unlikely to be extended, considering the cost to the Treasury in missed stamp duty income. It may be extended for a limited period to help those sales already agreed get to completion but is unlikely to be extended for any substantial amount of time.
The government’s first-time buyer Help to Buy Scheme has just been extended to 31st May 2021. This applies to new build homes. Providing a route for first time buyers onto the property ladder.
There is no doubt that the first half of this year is likely to be slow for the property market as the stamp duty holiday ends. We will likely see the end of the furlough scheme which may see job losses and negatively impact consumer confidence. It is worth noting that unemployment although it has increased to 5 per cent since the pandemic took a grip, hasn’t reached the levels of 2008 financial crisis when it hit 8 per cent. This is largely due to the continuation of the Chancellor’s furlough scheme. An end to furlough will hopefully coincide with the continued roll out of the vaccination. And in turn allow a loosening of the lockdown and a progressive re-opening of the economy. The Bank of England’s chief economist has even gone as far as to describe the economy as being like a “coiled spring”.
As they say, “it’ all in the timing”, if the timing of these various events is right, there’s plenty of reasons to be optimistic for the property market in 2021.
I’d love to know what you think?