After that, it is expected that property demand will dampen as the incentive to move and make use of the tax break fades.
Zoopla said the number of sales agreed in October were 38 per cent higher than last year and as they move to completion, these are expected cause an above average surge in activity in the coming weeks.
House price growth hits three-year high
House prices in the UK increased 3.5 per cent in October, the largest yearly rise this year and strongest growth in nearly three years.
The average price of a house was £223,500 in October, according to the Zoopla house price index.
Despite rising prices and a 34 per cent jump in housing demand compared to last year, the firm said activity had fallen to levels seen before the lockdown in March when the market was boosted following the General Election.
Zoopla said the sales pipeline was 50 per cent bigger than this time last year and as a result, it expected completed housing transactions to reach 1.1m in 2020, just six per cent lower than 2019.
The firm said as tax deadlines and other market conditions brought sales forward into 2020 and 2021 Q1, it expected sales completions to run 20 to 30 per cent below normal levels in the second quarter of 2021.
After this, sales completions are expected to run 10 per cent below 2019 levels until the end of next year.
If the economic outlook improves and employment levels recover a rebound in sales volumes close to levels seen in 2019 is expected in 2022.
House price growth is predicted to hit four per cent before slowing to one per cent by the end of 2021 as weakened demand and economic uncertainty affects the market. A decline in demand and lack of excessive over-valuation of house prices will also contribute to a drop in house prices.
Housing stock will remain below average, creating a lack of homes to buy next year, Zoopla predicted. It said although some unsold stock might carry over from this year’s boom, a scarcity in available properties will help to prop up house prices.
Fewer high LTV mortgages
Zoopla said a prolonged lack of high loan to value (LTV) mortgages would affect housing chains and create further downside risks to the outlook of the market in 2021.
The firm expects lenders to return to this part of the market in the first quarter of next year, but not at the scale and competitiveness seen before the pandemic.
Zoopla’s report said: “At the start of 2020, many businesses operating in the housing market were expecting a bumper year as market activity ramped up in the wake of the General Election.
“The pandemic put paid to that in the second quarter, but the scale of the rebound has driven a remarkable turnaround.
“Housing plays a very important role for the economy as we have seen in 2020. The pandemic has re-enforced the importance of the home to UK households and this will continue to support the market in 2021.
“As we emerge from the current crisis it is vital that policy makers focus more on boosting the liquidity of the housing market that can support labour mobility, economic growth and better housing choices for all households,” the report added.