We recently reported that the average UK house price has reached more than £250,000 for the first time in history. So, with homes now more expensive than they have ever been, will this upward trend continue over the next 12 months or will values fall by this time next year?
Stamp Duty, Furlough, and Consumer Demand
A big reason for the high property values at the moment is consumer demand created by the stamp duty holiday – people are rushing to buy new homes before the window closes in March 2021. Once this scheme comes to an end, we should expect demand to fall significantly.
When people have no incentive to buy, we can expect the true financial and economical effects of the Covid-19 pandemic to start properly revealing themselves.
Then, when job retention schemes like Furlough start to end, more people will find themselves out of work. Combined with the fact that many months of closures for shops and hospitality venues will put people out of work, there are going to be many, many people without stable, steady incomes next year.
As demand falls, so too will prices. However, let’s not forget that a vaccine could well be our savior within the next 12 months. If so, the rapid decline of Covid could create another mini-boom for property in Winter 2021 as those people who have genuinely been shielding themselves this year start to come out into the world again.
However, according to Financial Reporter, “over 49% of brokers believe that the end of the stamp duty holiday and an end to the help to buy equity loan scheme, both scheduled to end in March 2021 would cause house prices to go down or flatten by the end of next year”.
Before Covid, Brexit was considered the biggest threat to a healthy UK housing market and, despite our massive shift in interests, the Brexit transition commences on 1st January, 2021. Will this have any impact on house prices?
The important thing about Brexit is that it brings uncertainty. In the housing market, uncertainty is usually seen as a bad thing. But, post-Brexit property values are going to depend largely on location. In London, for example, prices might not be impacted at all. But in those areas where the negative or transformational aspects of Brexit are to be felt hardest, prices could tumble.
It depends, too, on how the wider economy reacts to Brexit. After the referendum, markets didn’t suffer nearly as much as the experts predicted they would in the aftermath of a Leave victory, so it’s reasonable to think that the same will happen upon our final exit from the EU.
But, a so-called No-Deal Brexit could bring really bad things for the economy. The UK could be left out in the cold to fend for itself. If this happens, we should expect at least a period of slump as the economy panics and house values inevitably tumble. How long this lasts is anybody’s guess.
So, is it up or down?
As you can see, there is no certain answer for whether house prices will be higher or lower this time next year. Ask two different experts and you can expect two different answers. But one thing seems easy to agree on: the government’s emergency intervention in the form of job retention schemes and the stamp duty holiday must eventually come to an end. When it does, a lot of the pain and hardship which has so far been kept at bay will come crashing down. As a result, it’s reasonable to think that houses prices will be lower this time next year. If you’re looking to buy a new home, we strongly recommend you think about doing it now instead of putting it off.