Where does the housing market go from here?

The housing market had an extraordinary stop-start year in 2020, characterised by what the head of research at estate agent Hamptons describes as “a relocation frenzy fuelled by the stamp duty holiday and cheap mortgage deals for buyers with plenty of equity”. This translated into price rises, particularly for country and coastal homes, and larger properties with outdoor and work spaces.

The Halifax says average prices were up by 10% across the country and demand for houses overshadowed the appeal of flats, with the average detached house fetching a massive 49% more than its asking price in the third quarter of the year. In the south east of England, Hamptons reports a 96% increase in the number of homeowners looking to move, although the number of buyers registering with agents was slowing by the end of 2020.

So what can we expect this year? In London, the housing market is likely to be impacted by the effect of the pandemic on employment as the capital is heavily dependent on jobs in retail and hospitality, and more employees have been furloughed than in other areas. However, despite the HMRC reporting 819,000 fewer people in employment in November than at the start of the pandemic and the Office for Budget Responsibility (OBR) predicting a sharp rise in unemployment this year, pay is still expected to go up. So those in secure employment and wanting to move, should still create demand.

The biggest question being asked now, is whether or not the stamp duty holiday is likely to be extended beyond March? If it is, Hamptons quotes a predicted 100,000 extra sales in 2021 as a result. However, much of this will hinge on the market remaining open for business. If the pandemic worsens and the Government locks down property transactions as it did last March, all bets are off.

Detailed guidance published last week on how all sectors of the property market should operate during the current lockdown included this warning: “It may become necessary to pause all home moves locally or nationally for a short period of time to manage the spread of coronavirus…If you are about to enter into a legally binding contract, you should discuss the possible implications of COVID-19 with your legal professional and consider making contractual provisions to manage these risks.”

So the government is leaving the door open for more restrictions and it is clear that 2021, despite the best guesses of industry commentators, could turn out to be just as unpredictable as 2020 proved to be.