Well – what a year we’re looking back on! From all of us here at Buying Agent Partnership, we can safely say that 2020 proved very different to our expectations – and of course, the property market is no exception. 2020 certainly proved an interesting year for the property market – with fluctuations and changes as a result of the coronavirus pandemic.
So, what’s in store for us, as we step into 2021? Our property finding experts have spent the last few months making their predictions for the future. With such a turbulent and difficult year, it’s hard to predict exactly how the housing market will be over the next twelve months. Nevertheless, as we enter the final few weeks of this year, here’s a few of the things that might affect what happens in the property industry in 2021…
Stamp Duty Holiday
One of the biggest boosts to the property market at the moment is the ‘stamp duty holiday’ as a result of coronavirus. The current UK stamp duty holiday was introduced by the government to combat lower household incomes and high rates of furlough and unemployment as a result of the pandemic. The fact remains that until 31 March 2021, buyers will pay no Stamp Duty on the purchase of their main property costing up to £500,000.
This was understandably an enormous boost to individuals looking to buy a home in 2020 – and is one of the key reasons for a late surge in completions. Those looking to complete by the end of March are a key boost to the market at present, which has kept prices strong for hopeful sellers. The reduction in stamp duty means buyers can afford to pay the asking price, thanks to the huge saving they will make elsewhere if they complete before March.
However, one issue being reported on currently is the fact that local authorities are taking much longer to process the applications due to the sheer volume of hopeful applicants trying to beat the March completion date. Both valuations and local authority searches are a part of the property purchase process which are taking between 4-6 weeks at present to take place. This conveyancing search can be booked personally to circumvent the delay, which allows completions to take place and allows buyers to still secure a hefty saving – a good workaround!
Another aspect which will affect the property market in 2021 will of course be standard mortgage rates across the UK. Currently, the UK is experiencing huge fluctuations in mortgage rates, likely as a result of the coronavirus pandemic.
At close to zero, the Bank of England’s base rate in the UK is currently lower than ever before in a response to the crisis: the Bank of England made two rate cuts in quick succession, from 0.25 per cent just before the Budget, and now to 0.1 percent.
However, recent investigations into what this might mean for first-time buyers with smaller deposits revealed that they may face paying over 5% interest for home loans, as lenders push up the cost of borrowing for people with a smaller initial sum.
The financial data company Moneyfacts reported that the average five-year deal for buyers offering a 10 percent deposit is now 3.92 percent, almost a whole percentage point hike from 2.94 per cent in December 2019. This means that first-time buyers are facing a tough choice. As reported in the Sunday Times, a representative from the mortgage broker Trinity Financial, Aaron Strutt, explained: “Longer fixed deals are usually meant to give borrowers a bit of extra security, but there’s no security in overpaying.”
Though it is true that some banks are not accepting mortgage applications from people who are furloughed, in general a lower mortgage rate combined with a stamp duty holiday means that we could see a boosted property market in the first few months of 2021.
If you’re thinking of moving in the next 5 years and you have to pay stamp duty – our experts warn that you might not make any money. If you’re looking to sell quickly ( for instance, if you want to move on again in the next 12 months – you’ll likely lose money, so be warned!).
Potential New Government Policies
Of course, the end of the stamp duty holiday won’t be the only change to the property market in 2021. Further measures introduced this year to remedy the effects of coronavirus will have knock-on effects for the future of the industry, such as the proposed end of the furlough date in March of next year. Of course, this could all change, but it is possible that an end to the government’s financial support could cause a downturn in demand, as buyers may no longer have the same amount of disposable income. All of this supports the idea that we may yet see a boosted first few months of 2021, but we could see a decline from March with the end of these support systems in place.
Another aspect which could affect the 2021 property market would be any new legislation on taxation introduced to the UK. In order to remedy the financial impact of the pandemic, governments are in discussions on how taxation could change to recoup some of the cost of government lending. For instance, capital gains tax on second homes might change in 2021, which would impact those looking to make a second property purchase – but at this stage, we’ll have to wait and see!
Britain’s exit from the European Union is doubtless going to impact the property market in the UK in 2021 – even if we aren’t quite sure in what way this will be! Experts recorded a fall in prices following the Brexit referendum vote, which had largely recovered by late 2019. Despite the impact of COVID-19, which effectively paused the property market for months earlier this year, there has been a reasonably steady price growth as buyers returned.
At least in the short-term, the impact of increased demand following the stamp duty holiday begins to show over the next few months. Mortgage rates, as we have noted, remain competitive – ensuring buyer confidence remains higher. Of course, the logistics and exact circumstances of Britain’s exit from the European union remains uncertain – but, with a deadline of January looming, we won’t have to wait long to see what happens.
One thing our experts do note, regardless of all these potential factors, is that what the rest of 2021 means for the housing market will depend on your personal circumstances as a buyer or seller. Here at Buying Agent Partnership, our professional property finders have years of experience within the industry – and can advise, assist and ensure that you make the right decision for yourself and your circumstances. Acting for you, and not the seller, means that we’ll always work with your best interests in mind, finding your new address (with minimum stress!).
Whatever 2021 brings to the housing market, one thing’s for certain – Buying Agent Partnership will be here to help you handle it! For more information, please don’t hesitate to get in touch with us. Together, let’s find your new home in 2021.