We’re sure you’ll agree that, thanks to the pandemic and lockdown, 2020 was not the year everyone expected – and least of all for the property industry! But what will happen to UK property prices in 2021? Will we see price rises in both the sales and lettings sectors? Romans’ property experts give us their predictions for the year ahead…
Despite all that’s happened over the last 12 months, the housing and rental market remained surprisingly resilient. During the summer there was a surge in demand due to the Government’s announcement to put Stamp Duty payments on “holiday”, and UK house prices experienced their biggest monthly rise in 16 years.
With the Brexit deal now confirmed, one area of uncertainty for the trajectory market has been removed. However with another national lockdown underway, and the Stamp Duty holiday still set to end in March, there is likely to be just as much change in the property sector in 2021.
To try and make sense of what could arise in the property market over the next 12 months, the directors at Romans have answered the most asked questions about the future of the sales, lettings and buy-to-let markets.
Property prices to stay resilient and stable
Properties were selling for the asking price, or even more, during the summer 2020 peak when demand in the housing market reached an all-time high. Despite the UK kicking off the year with a third nationwide lockdown, the Brexit deal has been agreed and vaccines are beginning to be rolled out, so 2021 is looking positive for housing.
We predict that house prices may soften slightly, but will stay resilient and stable in 2021, particularly for three- and four-bedroom houses. We are likely to see prices in some areas rising, and there will be regional variations.
Some of our big cities and town centres, however, may see a fall of around three-four percent, particularly for flats, where there is an oversupply in town and city centres, with more developments already in progress.
Rents are easier to track as they can’t outpace wage growth, and we expect to see a steady increase of one-two percent this year. Much like house prices, this is likely to be lower in bigger cities, where we are seeing less demand, and be higher in suburbs or on the outskirts of cities.
Will the Stamp Duty holiday be extended?
Following the introduction of the Stamp Duty Holiday, we've seen significant growth in the house sales pipeline. We’ve already seen calls to extend the deadline from the property sector, and that announcement would really encourage continued and welcomed momentum in property sales next year, as well as provide a boost to the wider economy. This is even more essential given that pandemic restrictions are continuing on during this third lockdown.
We hope the Chancellor will announce in March that the holiday will be extended until the end of 2021. This will allow for house sales that didn't get through in time to still take advantage of the reduction in Duty, as well as keep the housing market thriving.
Where do people want to live?
Starting 2021 at home in another lockdown will likely see many go in search of more space, looking for gardens and separate areas to enable easier working from home or to home-school children. With the commute to big cities still not returned, we are likely to see a continued ‘escape to the suburbs’ this year in order to upsize to these larger properties.
We expect the desire for properties, both to buy and rent, in suburbs to continue to grow, whilst we are already seeing reduced demand for flats in city centres.
Rightmove reported Lightwater in Surrey had the highest uplift in buyer searches in 2020, and that fits the pattern we expect to see across the country this year. Areas around one hour away from big cities, with good transport links, facilities and lots of green space are where both house buyers and renters will increasingly seek homes. This is areas such as Egham, Uxbridge and Woking outside London, while further north we are seeing growing interest in Warrington, Crewe and Loughborough.
More homeowners will embrace the let-to-let-market
Many homeowners will become both landlord and tenant next year in order to obtain a bigger property and more green space, following the trend for upsizing. Home movers are having to pay almost £68,000 on average to move from a two-bed flat to a three-bed house according to Rightmove – £4,000 more than in 2019. With the cost of trade-up moves rising and mortgage lending currently extremely competitive, we foresee that homeowners will choose to let out their existing property and rent a bigger house in order to get the spacious home they want, quickly and within their budget.
Following the 2008 financial crash, the let-to-let option became popular and this will be increasingly used by homeowners next year, particular among those in leasehold flats, or for those with properties seeing less demand who are finding it difficult to trade-up.
The property market won't be affected by Brexit
There is more certainty for the housing market now that a Brexit deal is in place, and this is unlikely to have much of an impact on the sector in the short term. Of course, if, longer term, the Brexit deal causes wider job losses, this could affect the house prices, but in the short term, we will likely continue to see stability. The country’s economic recovery from COVID-19 and job uncertainty are more likely to impact house prices.
Virtual viewings will continue
There was a huge uplift in virtual viewings at the start of the pandemic in 2020, and we predict that these will still remain a strong part of the process for both sales and lettings in 2021. Buyers and tenants jumped back pretty quickly to wanting to physically view a property when lockdown restrictions were lessened, so we don't expect virtual viewings to take over the viewing process completely.
However the convenience of video tours will continue to help those unable to see a house physically, and reduce the time needed for wasteful viewings – for both buyers and sellers, as well as landlords and tenants.
Tenant management will be transformed by Open Banking
In lettings, we expect to see more agencies embrace Open Banking and online customer accounts for maintenance to speed up tenant reference checks, payments and maintenance resolutions. At LRG we have recently done just this, introducing Open Banking-based tenant referencing across our rental portfolio.
This technology allows our agents to scan a prospective tenant’s bank account transactions, if they grant permission, and determine their rent payment history instantly. This will allow landlords and agents to turn around affordability checks in minutes, instead of days, and provide better lettings management throughout tenancies.
There’ll be an uptick in buy-to-let investments in residential property
Many commercial property tenants will seek to downsize their office space as a lot of companies continue to work from home. Many landlords and investors will look to diversify their portfolio and invest in more residential property developments in order to minimise risk as the uncertainty in the commercial sector remains.
In direct-to-residential lettings, we’ll likely see landlords diversifying from one- and two-bedroom flats into three- or four-bedroom houses to secure their investments, matching the demand for larger properties. With interest rates low and the stock market volatile, property is still one of the few places that people can secure investment in for the longer term. The buy-to-let market will continue to be buoyant, in particular in the Midlands and the North thanks to the attractiveness of current lower prices and increased yields.
Popularity will dip for online estate agencies
We predict a shift away from online-only agencies towards those with a high street presence. Online agencies currently account for only around 8% of all transactions, but this might slip again if the market gets more challenging later in the year than the boom in demand that we saw in summer 2020. Vendors will want local expertise from their estate and letting agents in this constantly-changing market.
Another year of change set for 2021
The property industry has had to adapt quickly following so much unexpected change to the housing market in 2020 and this has set the industry in good stead for 2021. Despite economic fluctuations, the housing and rental markets will stay buoyant – especially following support from additional Government measures, such as the extended furlough scheme and the potential extension of the Stamp Duty Holiday.
The pandemic has changed how we all think about our homes and where we live, possibly forever. We are prepared to support our customers to make that change as we move through 2021.
Want to talk to a local property expert about your property plans? Whether you’re looking to sell or let, call us on 0333 355 7548 or complete the form below and we'll be in touch. All our property valuations are free of charge with no obligations.