The most upbeat prediction for 2021 is a 4pc increase in property prices, despite the stamp duty holiday and the Covid furlough scheme coming to an end in the spring.
According to Nationwide Building Society, property prices climbed to a six-year high at the end of 2020, rising by 7.3pc over the year, although the mortgage lender expects the market to slow ‘sharply’ over the next few months as unemployment increases.
By contrast, the lender Halifax anticipates a drop in house prices of between 2pc and 5pc next year, while the Office for Budget Responsibility (OBR), the Treasury’s independent forecaster, is more downbeat, predicting a fall of 8pc in prices in 2021.
Property listings website Rightmove offers the most optimistic forecast, expecting prices to rise by 4pc next year. However, researchers at Savills anticipate that the market will be flat across all parts of the UK before speeding up again in 2022.
Other property experts, such as Zoopla, Knight Frank and Chestertons, suggest average prices will increase by only 1pc to 1.5pc, in effect signalling a slowdown compared with 2020.
A market recovery that took many observers by surprise was fuelled by the pent-up demand following the first national lockdown in March, and the temporary stamp duty holiday that began in June. With the result that by September the market was going full tilt at the fastest pace since 2016.
Even in December, Nationwide said prices were a notable 5.3pc above the level in March, when the Covid-19 pandemic first hit the UK.
Property prices in North West predicted to climb highest
Robert Gardner, Chief Economist at Nationwide, commented that the resilience seen in recent quarters seemed improbable at the start of the pandemic. Especially as housing market activity almost came to a complete standstill during the first lockdown while the wider economy contracted by an unparalleled 26pc.
Rightmove claims there is a logjam of 650,000 properties changing hands, which will no doubt keep the market occupied in the first quarter of next year.
Richard Donnell of Zoopla expects transactions to run 20-30pc below normal levels once the stamp duty bonus finishes, leaving property prices just 1pc higher at the end of the year than the start.
Property firm Knight Frank anticipates house price inflation to remain fairly subdued over the next few years, predicting gains of 1pc in 2021 and 3pc in 2022.
Savills expects property price rises to come to a juddering halt next year, with a rise of just 1pc in the London area during 2022. Lucian Cook, head of residential research at Savills, believes the economic effect of the pandemic will adversely impact the housing market next year.
While expecting the resurgence to be most robust in the North West of England, he thinks price rises could jump to 6pc in 2022 and 8pc the following year. Savills’s five-year forecast places the North West firmly in poll position with a likely 27.3pc gain and London at the bottom with a 12.7 gain.
Nick Barnes, head of research at Chestertons, forecasts that after an outstanding year of growth in 2020, price growth across the UK will slow to 1.5pc. As Greater London prices have risen less but are likely to fall more, he expects them to drop by 2pc by the end of the year.
Only certainty is more uncertainty
Russell Galley, Halifax’s MD, notes that the fall predicted by the bank would only partially reduce the £18,000 increase in average prices recorded over the past year.
The key long-term issue for the housing market, he added, is still the inequality between generations and in the matter of incomes. In particular, the ability of the young and lower-paid to afford good quality housing that meets their needs.
Therefore, he said, the impact of Covid on the economy will increase the need to make improved housing availability and affordability a priority.
So great is the uncertainty in the economy now that the Royal Institution of Chartered Surveyors (RICS) cannot with any confidence issue a house price forecast. Christian Cubitt, of RICS, said if 2020 has taught us anything, it’s ‘don’t make predictions!’ Going into 2021, the only certainty we have is more uncertainty.
