Housing market forecast for 2021

Estate agent Mark Manning predicts what will happen to the housing market when government support packages end

How will the market fare in 2021

Since lockdown was eased, there has been an increased emphasis on quality of life and working from home, which alongside the stamp duty holiday and pent up demand, has created a mini property market boom.

However, between March 31 and April 30, the stamp duty holiday, furlough scheme and existing Help To Buy initiative are all set to come to an end, causing people to worry about the impact that all three finishing simultaneously will have on the housing market. There is no doubt these things are potential threats to the continuing strong performance of the property market, but I don’t think the impact will be anywhere near as bad as some people are predicting.

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Estate agents are fully aware of the issues facing the market, particularly the end of the stamp duty holiday, so we have planned meticulously for it and factored it into prices.

There has been a huge backlog in the buying process since the market reopened, meaning sales are taking longer than normal to complete, and because of this, we have been having honest discussions with buyers since October and advising them to have the funds in place to pay their stamp duty bill in case their sales don’t complete ahead of the deadline.

I know other agents and solicitors have been doing the same, so I’m confident that most people who have offered on houses over the past few months will have factored potential stamp duty costs into their budget. This means we won’t see a huge number of sales falling through because people are suddenly hit with an extra, unexpected cost.

There is no doubt that some people who don’t make the deadline will drop out of sales due to poor budget planning, but it will be a small percentage and it will not have any major, long-term impact on the market. Many people are also worried that once the tax break ends, activity levels will drop and we will see the market slow down but I don’t think that will happen.

Some buyers who would have bought next year have pushed their plans forward to this year to take advantage of the stamp duty break but most people who would have moved next year still will, so we will see the market settle down rather than dipping. The same goes for the end of the Help To Buy Scheme. Developers have had time to adjust and plan for it, so it’s not going to have a dramatic impact.

The new Help To Buy Equity Loan Scheme that is replacing it from April 1, 2021, is for first-time-buyers only, so I think we will see a return of developer-focused incentives to ensure demand for new builds remains high.

Furlough ending is more of an unknown, and I am in no doubt that many people will unfortunatelymlose their jobs when it does. People currently furloughed will be putting off moving until they have more job security and those who do lose their jobs when the scheme ends are unlikely to buy property in the immediate future.

However, many people will come off furlough and return to their jobs at the end of April and those who have put off moving because of job insecurity may now move in 2021. So, the potential dip in buyer numbers due to unemployment will be balanced by those who return to their jobs and feel confident enough to buy.

There is also the mortgage market to consider, which still hasn’t fully opened back up since lockdown. Lenders have had to act cautiously for most of 2020 but in January, 2021, I believe that mortgage lenders will start to become less cautious and we will then see a steady return of more lower deposit mortgages again. Some big lenders have already re-entered the market and with more to come, this will definitelgive the market a real boost.

The Government will also double down to ensure the housing market remains strong in 2021, as it knows how fundamentally important it is to consumer confidence and the wider economy.

In conclusion, what I think we will see at the end of April next year, 2021, when the trio of support schemes have ended is a short, sharp response where market activity dips for two to three weeks before quickly recovering again.

Demand still outstrips supply, and because of this and the other factors I have mentioned here, the market will quickly reset before carrying on as normal.

It is harder than ever to predict anything with certainty right now but there’s still plenty of life left in the housing market and I think over the course of next year we’ll see sales and house price growth return to pre-lockdown levels and grow steadily.

So, although we are undoubtedly in for an unprecedented period, it is most certainly not all doom and gloom and the housing market will continue performing strongly next year.

*Mark Manning is managing director of Manning Stainton estate agents.

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