2020 was perhaps the most unpredictable year in property, thanks to the pandemic and its effects on the UK economy. However, the housing and rental market has stayed remarkably resilient, with a surge in demand happening over the summer due to the pause on Stamp Duty, and UK house prices experiencing their biggest monthly rise in 16 years.
Now, with Brexit negotiations ongoing, the Stamp Duty Holiday set to end in March, and the trajectory of the pandemic still uncertain, there is likely to be just as much change in the property sector in 2021.
To try and make sense of the property market in the coming year, we’ve laid out our predictions for sales, lettings and the buy-to-let market in 2021.
2021 property predictions
House prices will stay resilient
One of the biggest questions over the property market for the coming year is: “how will housing prices change?”. Demand in the housing market is currently at an all-time high and during the summer peak, properties were selling for the asking price, or even more. We briefly saw house prices soften prior to the second lockdown. But now, with positive news of a vaccine on the horizon, we are seeing another strong boost to the housing market.
Therefore, our prediction is that house prices will stay resilient and stable in 2021, particularly for three- and four-bedroom houses. There will be regional variations and we are likely to see prices in some areas rising.
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 much more development already in progress.
Rents, meanwhile, are easier to track as they can’t outpace wage growth. Therefore we expect to see a steady increase of one-two percent in 2021. However, as with house prices, this is likely to be lower in bigger cities, where we are seeing less demand, and be higher in suburbs or on city outskirts.
The stamp duty holiday will likely be extended
The house sales pipeline has grown significantly since the introduction of the Stamp Duty Holiday this year. We’ve already seen calls to extend the deadline from the property sector, and that announcement would really encourage continued and much-needed momentum in property sales next year, as well as provide a welcome boost to the wider economy.
Of course, it’s unlikely to be extended indefinitely, so 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.
Upsizing to the suburbs will continue to grow in demand
Having to spend more time at home this year has led to many of us seeking 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 having returned, we are likely to see a continued ‘escape to the suburbs’ in 2021 in order to upsize to these larger properties.
Conversely, we are already seeing reduced demand for flats in city centre, while we expect the desire for properties, both to buy and rent, in suburbs to continue to grow.
Rightmove reported Lightwater in Surrey had the highest uplift in buyer searches in 2020, and that fits the pattern we’re seeing across the country. Both house buyers and renters will increasingly seek homes in areas around one hour away from big cities, with good transport links, facilities and lots of green space. Outside London this is areas such as Egham, Uxbridge and Woking, while further north we are seeing growing interest in Warrington, Crewe and Loughborough.
More homeowners will embrace the let-to-let-market
Following the trend for upsizing, many homeowners will become both landlord and tenant next year in order to obtain a bigger property and more green space. According to Rightmove, home movers are having to pay almost £68,000 on average to move from a two-bed flat to a three-bed house – £4,000 more than this time last year. With the cost of trade-up moves rising and mortgage lending currently extremely competitive, we foresee homeowners choosing 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.
Originally popular following the 2008 financial crash, the let-to-let option 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 Brexit transition won’t affect the property market
That’s something we never thought we’d predict, but events have overtaken us this year, and there’s only one agenda item for the housing market at the moment – how we live following the pandemic.
Of course, the conclusion of the ongoing Brexit negotiations might have an impact on the job market, which could then have a ripple-out effect to housing. Conversely, confirmation of a trade agreement with Europe, coupled with the positive news about a vaccine, would drive demand in the housing market and lead to a boost in the economy as a whole. But overall, the desire for lifestyle changes will influence demand in the housing market more than Brexit.
Technology will transform the way we move home
Virtual viewings saw a huge uplift during the pandemic, and we predict that these will still stay a strong part of the sales and lettings process in 2021. We don’t expect this to take over the viewing process completely – buyers and tenants jumped back pretty quickly to wanting to physically view a property when the lockdown had lessened. But the ease and 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.
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. 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
With so many companies now working from home, many commercial property tenants are downsizing their office space. This uncertainty in the commercial sector will lead many landlords and investors to diversify their portfolio and invest in more residential property developments in order to minimise risk.
Similarly, 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, so the buy-to-let market will continue to be buoyant. The Midlands and the North in particular will be attractive thanks to the current lower prices and increased yields.
Online estate agencies will dip in popularity
In a constantly-changing market, vendors will want local expertise from their estate and letting agencies to help them through. So, 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 in 2021 than the boom in demand that we have seen this year.
Preparing for a year of change
Following a year of rapid and unexpected change to the housing market, the property industry has had to adapt quickly. That preparation has put the industry on a good path for 2021. Despite the fluctuations in the economy, the housing and rental markets will stay buoyant next year – 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. Estate agents and letting agents must now prepare to support their customers to make that change in 2021.