Narinder Singh Nijjar, Directors & Co-Founder – The Lettings & Sales Business
“If 2020 has taught us anything, it’s ‘don’t make predictions!’ The only certainty we have going into 2021 is more uncertainty.”
Never has a truer comment been spoken however, I will try and share my thoughts on where I see the property market in 2021.
The property market nearly ground to a halt in the first quarter of 2020 with the effects of the first lockdown and the pandemic having a noticeable impact on the market. From quarter two onwards, pent up demand from buyers and the stamp duty holiday, that began in June 2020, spurred such a market recovery that it took many seasoned observers by surprise. Some agents reported an increase of 25% of sales instructions coming to market. By September of last year, the housing market was at its greatest growth since 2016 and showing no sign of slowing down. This was fantastic for home sellers, buyers and property professionals.
As we enter 2021, my opinion is, that we will now see a levelling out of the market with slight decreases in property prices. Once the stamp duty land tax initiative (SDLT) comes to an end in March and then closely followed by the end of the furlough scheme in April, I feel you will see a slowdown in sales completions as the incentive of no stamp duty to pay will no longer be there and thus, impact the appetite to sell or buy.
I say levelling out because we have witnessed an artificially high value market driven by some of the factors that I have mentioned such as SDLT and now this will come down to more realistic levels. I would like to point out that despite this, I do feel that, surprisingly, there will still be an upwards trajectory of prices and I can see a 1% average increase in property prices in the first two quarters. This is just my personal forecast and is based on the transactions that we have seen going through this past year and compared to previous years trends.
The pandemic has changed the type of property sought by house-hunters, more commuters are relocating out of the larger cities such as London and to the more family friendly areas such as Brighton, Southampton and Leicester. More thought is being given to larger outdoor spaces and home office set ups. This in itself will ensure that prices may well stay robust for a while longer in the aforementioned areas or other areas of the same ilk. Obviously, this may go hand in hand with a decline in London prices.
Another challenge on the horizon for the property market is that while first-time buyers have been a driving force since 2010, following the introduction of Help-to-Buy and the availability of high loan to value (LTV) mortgages, the market looks set to change.
Lenders are withdrawing some products that would have been geared towards the first time buyer and this in turn means that lenders are viewing smaller deposits as more risky for lending.
In turn, many first-time buyers are now discovering they need to have much larger deposits – in some cases almost 40% – which is contracting the market overall.
While property prices are clearly an important consideration, the rental market moves independently, bringing with it its own predictions. The rental market tends to be stronger and more resilient than the sales market and this is even more apparent if there was to be a downturn in house prices. The last major financial crisis in 2009 resulted in house prices falling by 18% but rentals only fell by 2%. This could well be the case as we head in to 2021. Landlords who are in it for the long game will hopefully see it as business as usual with the exception of those investors who are linked to the student market… this will obviously be dictated by external factors such as universities and colleges being allowed to open again and the appetite for students to live in shared accommodation.
Investors always ask me when is the best time to buy and while there is no tangible science to this, I do always stress that I always feel it is best to buy in a downward moving market. You may think that I want to buy when things are rock bottom but the challenge with this is that nobody really knows what the level of rock bottom actually will be. My experience has taught me that it is always a good time to negotiate a deal when on a downward spiral as sellers will be more receptive to a deal as they feel that the market is still going down “and best to strike a deal while I can”
In summary, I believe the sales market will come down, but thankfully not at the levels of 2009.
For those of us who are ready to make a move, there will be some fantastic deals to be had. If everyone is worried about the values of property and in theory “anti-property”, then that is the time to invest and build your portfolio.
I’ve not even begun to digest the impact of Brexit yet……