2021 forecast: 4% price growth as housing priorities outweigh uncertainties
- Rightmove forecasts robust 4% national average price growth in 2021 as housing priorities stay high on people’s life agendas, though price rises for newly marketed properties will be at a slower pace than this year
- 2020’s unanticipated market momentum sees prices finish 6.6% up on 2019 despite a fall of 0.6% this month
- Busy Q1 expected as stamp duty deadline approaches, with logjam of 650,000 properties currently changing hands – this huge number is unchanged on last month due to strong sales agreed for this time of year
- Slower Q2 as average tax saving of 1.9% of purchase price in Great Britain due to end, but ongoing demand and cheap mortgage rates available for some will help to support continued modest price growth
- Uncertainties remain in 2021, but housing needs and fresh-start mentality suggest the market will continue to outperform, as shown by 53% more prospective buyers contacting estate agents than at this time a year ago
Overview
Rightmove forecasts a robust 4% national average house price growth in 2021 as there is strong evidence that people will continue to have their reprioritised housing needs high on their life agendas. The unexpected market momentum of 2020 overcame the unknowns of the pandemic and associated economic fallout, and though headwinds and uncertainties remain, demand for housing and buyer affordability appear to be strong enough to outweigh some of these dampening effects. Rightmove does however predict that the price rises will be at a slower pace than this year, which finished up by 6.6% (up by £19,920 to £319,945) despite a small monthly fall of 0.6% (-£2,080). The stamp duty holiday has undoubtedly added some extra momentum, but buyer demand was already very high prior to its announcement in July, and remains remarkably resilient at 53% higher than this time a year ago, despite the decreasing likelihood of completing a purchase by 31st March if it is agreed now. Having the biggest home-hunting audience in the UK, Rightmove has unique insight into future demand for property, and this, alongside other evidence, underpins our 2021 forecast of a 4% rise in the average price of property coming to market.
Tim Bannister, Rightmove’s Director of Property Data comments: “2021 has a lot of variables, and so is not an easy one to call, but with Rightmove’s unique leading indicators of buyer and seller behaviour we are confident that the housing market will continue to outperform general expectations next year as it did this. Our 2021 forecast of a 4% price rise is more conservative than the unsustainable 6.6% national average seen this year. There’s likely to be a lull in quarter two unless the stamp duty holiday is extended, but for many buyers its removal will not be make or break, though may lead them to reduce their offers to a degree to compensate for the higher tax, and indeed many sellers may be prepared to help to mitigate their buyer’s financial loss. First-time buyers will remain largely exempt, so in most cases will be no worse off. The maximum savings of £2,450 in Wales or £2,100 in Scotland are considerably less decisive than the £15,000 available in England for a house costing £500,000 or more, which does however only apply to a small part of the market.”
It will be a busy start to 2021. The New Year is typically a time for resolutions for the year ahead, and many will see it as an opportunity to draw a line under 2020, which may well include a fresh start in a new home for those who have not already acted. Many have already done so since the English market re-opened in May, and many more are continuing to do so despite the seasonally quieter run-up to the Christmas period and the declining chance of completing a purchase before the stamp duty deadline. Despite the clock ticking, around 130,000 sales were agreed over the last month, up by a remarkable 44% on the same period in 2019. A month ago we said that there were a massive 650,000 sales agreed and in the pipeline, many of which will be aiming for completion before 31st March to qualify for stamp duty savings. One month on, and a month closer to that deadline, the figure remains at around 650,000 because 130,000 additional sales have joined the processing logjam and replaced the 130,000 completions or fall-throughs that have taken place in the last month. Some completions are already projected to be delayed until April next year, especially where there are search delays, legal issues or complex mortgage applications.
It will be a slower second quarter once the stamp duty holiday is over, though even with the average price in Britain up by 6.6% this year, cheap mortgage rates that available for some leave scope for further modest price growth despite the loss of the tax saving. Indeed all regions have seen far greater average price increases than the average savings in stamp duty, indicating affordability headroom. Pandemic-related uncertainties have been around for nearly a year, and Brexit uncertainties for far longer, and record activity month after month has proved that movers are willing and able to act on their new or existing housing priorities. Demand has therefore exceeded supply in 2020 with the number of properties coming to market for the year to date down by 0.6% on the same period in 2019, and the number of sales agreed up by 8.3%. As a consequence the number of available properties for sale is at a record low, indicating scope for some further modest price increases overall in 2021 despite those uncertainties.
Bannister says: “Despite these headwinds, ongoing demand still remains very high, indicating that there’s plenty of fuel left in the tank for the housing market. Interest rates remain at near-record lows, and we expect greater availability of low-deposit mortgages at competitive rates next year. These two factors will help to oil the wheels for home purchases by the ‘accidental savers’ who have collectively saved £100 billion that they couldn’t spend during the pandemic restrictions. With the expectation of a return to more normality in the second half of 2021 and a likely ‘fresh start’ mentality for some, there are sound reasons for continued positive market sentiment that will outweigh the economic, political, and health challenges ahead. Rural, countryside, and coastal demand will remain high for those re-appraising their lifestyle, but more normality will also help the recovery of those aspects of city-living that have seen a dip in their appeal.”
Agents’ Views
Nick Leeming, Chairman of Jackson-Stops, said: “The start of the new year is traditionally a busy time in the housing market, with buyers and vendors alike taking the festive period to plan for the year ahead. However, we are expecting the first months of 2021 to be particularly active as buyers try to squeeze in their deals before March 31st. Those looking to make savings on the stamp duty holiday must act now, we are advising any serious house hunters to have their offers in by January latest. Buyers and vendors at the prime and super-prime end of the market will continue to move throughout 2021 due to a change in lifestyle aspirations which have been spurred on by the COVID-19 pandemic. Many of these clients will be entering the housing market for the first time in decades as they haven’t had a pressing need to move or buy a second home so have held off doing so until now. Whilst the introduction of a viable vaccine will act as a shot to the arm for the housing market, restoring confidence at every level, the return of SDLT will slow transactions down at the lower end of the market although the top end will remain resilient.”
Marc von Grundherr, Director of Benham and Reeves, said: “We’re certainly seeing a sprint finish this year where the UK property market is concerned. This has been primarily driven by government stimulation in the form of the stamp duty holiday, protecting the market against the traditional air of lethargy that comes as we approach the Christmas period, and keeping it fighting fit both where transaction levels and price growth are concerned. We expect to see this tidal wave of market momentum spill over into next year and keep the market buoyant, as homebuyers race to cross the line before Rishi Sunak’s chequered flag falls on the chance of a stamp duty saving. While the end of this initiative will lead to an understandable drop in demand over the months that follow, it will be more a return to pre-pandemic normality rather than a dramatic market crash. This will be largely due to the firm foundations laid this year which should enable strong and consistent growth throughout 2021.”
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