Property Predictions 2021!
Well, 2020 was one hell of a year wasn’t it?
We were locked down, placed in tiers and generally held back – but this wasn’t true for the property market where prices rose at the highest rate for 6 years. Some people say that this is all due to the stamp duty holiday but this was only introduced on the 8th July and property prices had been doing well before then. It is true to say that the stamp duty holiday has boosted transactions levels but this is not the only reason property prices have remained strong. The main reason for price rises is the excess of demand over supply which increased in 2020 due partly to people wanting to move into somewhere suitable to be able to work from home and also partly due to the fact that builders weren’t able to build at their normal rates due to the restrictions which suppressed supply.
It seems that the property market is immune to the effects of Covid in a way that us humans aren’t!
But will it continue in 2021? And what are the main property market events we expect in 2021?
The stamp duty holiday: this was for properties purchased up to a value of £500,000 and will come to an end on the 31st March 2021. There were certainly many people taking advantage of this tax break but the effects of this benefit are already slowing. As it takes several weeks if not months to complete a property purchase in the UK it is basically too late to complete a transaction in time even if you started on New Year’s Day! Therefore, this won’t be a ‘fall off the cliff’ type of event that happens on the 1st April but more likely to be a gradual slowing of transactions which has already started.
The ‘feel good’ factor. Covid-19 has ensured that most of us had a pretty miserable 2020 but we can now all see that there is light at the end of the tunnel as the vaccines start to roll out. This is likely to result in a feel good factor where people feel liberated and excited about the future again. Most people will feel an immense sense of relief, renewal and joy and will want to start their lives again, and this will certainly involve people pairing up, getting married, having babies and moving home into a new ‘nest’. This will increase demand for properties and prices will rise and it’s likely that this feel good factor movement will manifest at about the same time – ie the Spring – as the stamp duty holiday ends, so will offset much of the impact of that.
Commercial property excess: sadly, there were many businesses close in 2020 and I’m thinking specifically about my local high street where there will potentially no longer be a Top shop or a Debenhams but the properties are in great locations and it’s likely that many of these empty properties will be converted for private residential use. My belief is that the ground floors are likely to remain as some kind of local retail outlet but the upper floors will be converted to flats. For property investors there will be development opportunities.
Demand and supply: in a normal year online property searches increase by 57% between boxing day and the new year (source: Rightmove) as some people want to start the new year in a new property. I suspect some of these searches are by people who have been fed up with their families over Christmas so I don’t think there will be the same impact this year – after all if we were going to be fed up with being shut in with our families we would have already experienced that during 2020!
Nonetheless we start 2021 with the same shortfall of supply and this won’t turn around quickly. The challenge is too big and has gone on too long and this is what makes property prices so resilient – even in pandemics.
Return to normal: I believe the property market will return to normal – in fact I’m not sure it ever left it’s normality and 2020 demonstrated that the property market remains incredibly resilient irrespective of external events and this is fundamentally because of the difference between demand and supply. Also, there will be more and better financial products available as the fear of redundancy diminishes and the finance providers go back to their normal level of risk and accept smaller deposits.
The property market behaved ‘normally’ throughout 2020 and I fully expect it to continue to behave normally during 2021: there will be some little ups and downs as there always are and I’m sure the year will start off with a little caution but there will be plenty of opportunities for residential purchases, developers and investors.