House prices have been climbing in recent weeks as pent up demand means there\’92s more competition for each property. Yet, forecasts suggest that property prices could fall in the New Year.
The impact of Coivd-19 on the property market
The property market temporarily closed in a bid to slow the spread of Covid-19. It meant plans and sales were put on hold. Once viewings began again, demand increased.
As well as high levels of demand, the Chancellor also unveiled a Stamp Duty holiday. People purchasing a property worth up to \’a3500,000 and who complete before the end of March 2021, won\’92t pay any Stamp Duty. Those purchasing a second home or Buy to Let property will still need to pay a Stamp Duty surcharge, but the full cost will be lower thanks to the holiday.\’a0
The latest Halifax House Price Index shows a 7.3% annual increase in September, the strongest growth seen since 2016. The price of the average property is now \’a3249,870. Supporting this, mortgage applications have surged to a 12 year high.\’a0
But will this growth continue?
Property prices predicted to fall 8%\’a0
It\’92s important to keep in mind that forecasts are just predictions, there are no guarantees.
However, the economic outlook remains uncertain as thousands of people have lost their job due to the lockdown. As job support schemes are scaled back, there will likely be further redundancies, which can have a downward effect on house prices.\’a0
As the Stamp Duty holiday draws to a close, the demand among homeowners for new properties and property investors is likely to fall too.\’a0
Looking ahead over the coming months, real estate advisers JLL predict house prices will fall 8% in 2020.
Moving on to 2021, the Centre for Economic and Business Research (CEBR) paints an even starker picture. The organisation has forecast a 14% drop in house prices by the end of 2021, as prices start to fall towards the end of this year.\’a0
Commenting on the recent house price rise, CEBR said: \’93What most of these factors have in common is that they are transitory in nature. Indeed, the Job Retention Scheme was cut after August and it, as well as the ban on mortgage possessions, is scheduled to end on 31st October, while Stamp Duty will revert to its original level in April 2021. Moreover, pent-up demand from the period of lockdown will eventually work its way out of the system in the coming weeks.\’94
Other experts are making more conservative forecasts. PwC , for instance, has predicted house prices will fall 1% if the spread of the virus is contained. But added the decline could be worse if another serious outbreak occurs.\’a0
While the actual figure varies between experts, the consensus is that house prices will fall in the first half of 2021.\’a0
Should I still buy a property now?
With forecasts suggesting house prices will fall, you may think about putting plans on hold. Whether it\’92s right for you will depend on your circumstances.\’a0
If you\’92d have to pay Stamp Duty, the holiday can still mean buying now is an attractive option for you. And while house prices are high, if you\’92re selling, you\’92re also likely to get a higher price for your own home.\’a0
For first-time buyers, who usually don\’92t pay any Stamp Duty on homes worth up to \’a3500,000, it can be more difficult to know what to do. Buying now could mean you end up paying a higher price than you would in a few months, but this isn\’92t guaranteed. And while falling prices can be frustrating, house prices have recovered and gone on to deliver long-term growth historically, you should view buying a house as a long-term investment that provides security, not a quick way to make a profit.\’a0
Remember, work out what\’92s affordable for you and stick to this price. It can be easy to go over your original budget if you\’92re negotiating or bidding against another buyer. Decide what the property is worth to you.\’a0
If you\’92re buying a property and would like advice, please get in touch. We\’92re here to help you understand affordability, secure a mortgage, and make long term plans.\’a0