Speaking on Investec’s 2021 UK Property Market Forecast, Knight Frank head of UK Residential Research Tom Bill said numerous question marks were hanging over the property market at the turn of the year, coinciding with a fall in annual house price growth rates.
Among these question marks were speculation over whether the stamp duty holiday, due to end on 31 March, would be extended and how emerging variants of the virus would impact the effectiveness of the vaccine roll out.
Furthermore, the introduction of a third national lockdown meant another readjustment for buyers, sellers and property professionals to make sure properties could be safely viewed.
“You could argue January this year was probably the most uncertain moment of the whole pandemic for the housing market. All these questions coming at once,” said Bill.
Despite this uncertainty and an increase in unemployment expected when the government’s furlough scheme is withdrawn on 30 April, Knight Frank does not think there will be a house price correction this year.
“Of course furlough is going to have an impact in terms of the jobs market and unemployment rates but at the same time I don’t think that necessarily means house prices are going to fall directly as a result of that,” he said.
“Furlough and the unemployment figures I think sadly are going to be more skewed towards younger workers, hospitality workers, bricks and mortar retail [workers] who typically rent, who have a more transferable skills set.
“So I think there will be an impact, but I don’t necessarily think it is going to be a major impact. Nor do I actually think the end of the stamp duty holiday is going to be the cliff edge that some people think it will be.
“If you compare it to the three per cent surcharge that came in in April 2016 for investors and second home buyers I think the two things couldn’t really be more different.”
Bill said the outlook for the prime property market was less clear as ongoing travel restrictions prevented overseas buyers from flying to London to view properties.
Boomerang effect
The return of homebuyers to the mainstream central London housing market seems more likely, said Bill, judging from trends currently seen in the lettings market.
A fall of between 15 and 20 per cent in rents in central London, as short-term lets like Airbnb and student accommodation flooded the rental market, has attracted tenants back to areas like Canary Wharf where they can walk to work.
“Some people talk about a fundamental shift in the way people are going to live and work,” he said.
“I think there will be a change but I’m not sure there is going to be a deep seated reversal of centuries of urbanisation that we have seen taking place in this country, actually what we are seeing right now in this country in the lettings market is a really interesting story that tells us that demand for city centre living is actually quite strong.”
Bill added: “I think that kind of boomerang effect will happen in the sales market. Not yet and maybe not to the same extent but I think it shows you that, yes the escape to the country story has been prevalent, but ultimately [it] will have a shelf life and ultimately if the price is right people are going to be drawn back to London and all that is has to offer.”
