On Monday I was invited onto the NRLA London: Housing Market in London panel. The webinar was a lively discussion about the state of the London housing market. I was grateful for the opportunity to share my thoughts on what I believe we can expect for 2021 in the property market following Brexit, Covid, the stamp duty holiday and so on.
My personal view is that we are likely to see a double dip recession. The economy alongside the housing market, as they go hand in hand, will steadily fall (not sharply) at the beginning of the year around March 2021. Largely I believe this will be due to the stamp duty holiday ending. The threshold of £500k being reduced back down to normal. That is stamp duty land tax being paid on properties that cost more than £125k or £300k for first time buyers, together with changes to the Help to Buy scheme that will come into play in April. No longer will Help to Buy be open to those that have owned before as it is now. I suspect it will just be for first time buyers in addition to any other changes they make.
Furthermore, I believe the downturn will linger at the bottom for a while whilst new Government schemes are being introduced; new ways of working are being created and the pot of jobs that are left will be scrambled on a first come first served basis. Hopefully young people will find employment to make them eligible again to seek mortgages.
At this point I feel we will see again a steady rise and recovery almost back to where we were. However, this will come with caution and may be short-lived because the full effects of Brexit will not have been felt and the cost of Covid will still to be lingering in the background with the furlough scheme ending. It is these factors coupled with cautious lending and down valuations of property that will suddenly throw us back into another recession of the same U shape. Therefore, double dipping us.
It seems quite a few housing experts have an optimistic view on the state of the property market come 2021, with Rightmove stating that despite a steady increase in house prices, there will still be buyer demand because “there is strong evidence that people will continue to prioritise their housing needs despite current uncertainty”. This isn’t entirely surprising considering the stampede of buyers even within this pandemic and although there hasn’t been a clear explanation for this surge, it is probably fair to say that the Stamp Duty Holiday coupled with other factors such as money saved due to some still earning during lockdown has played a big role in this.
As always there is a real mix of opinion; with some experts stating house prices will increase while some claim that there’ll be a fall in prices. One thing that is certain though there will be mass unemployment as a result of COVID-19, especially among young people. We will become a nation of renters and we don’t need statistics to tell us that the average person will still be living at home in their thirties as they simply cannot afford to buy.
What are your thoughts?