This overview of the 2020 UK Property Market has been brought to you by Elavace to round up all the headlines you need to know about the robust UK property market over the last year. For our annual review of the property market, we examine how the property market has shown its strength and resilience to escape the murky shadow of 2020 despite the continued efforts ofCovid-19. And why the shining light of the UK property market will serve as the beacon for all other markets as the country embarks on its exciting journey to global independence in 2021.
The UK housing market has experienced its fair share of highs and lows throughout the past 12 months. However, through it all, there’s still a great deal to be positive about despite a highly challenging year for the nation. At the beginning of 2020, the property market was stealing all the headlines having kicked off with a bang following Boris Johnson’s election victory. Coined the ‘Boris Boom’, the ramped-up certainty around Brexit and the resulted boost in consumer confidence and spending saw the property market leap from strength to strength as the months ticked on. That was until March, when the Brexit debate was forcedly pushed to one side and the headlines became dominated by the Covid-19 pandemic.
To help curb the spread of Covid-19, Prime Minister Boris Johnson announced a national lockdown and with it, an economic stand still as the property market remained closed for two months. Along with the temporary closure of building sites. As soon as the sector reopened in May, there was a rampant surge of pent-up demand which caused unbridled levels of market growth within the housing market. In addition to this, Chancellor of Exchequer Rishi Sunak announced a raft of support measures to spur on the property boom and ultimately, the recovery of the UK economy. This included a temporary stamp duty holiday for homes worth £500,000 or less, which remains in place until 31stMarch 2021.
As a result of this, the number of prospective buyers was the highest recorded in the past 10 years, according to ARLA Property mark. Additionally, demand for housing soared by 55% compared to 2010. Zoopla concluded: “The stamp duty deadline has focused the minds of committed movers in the near term and makes for a strong first quarter of sales completions in2021.” Moreover, the property portal listed the Northern Powerhouse giant, Liverpool as home to one of the UK’s strongest housing markets. This comes as demand rose by 3.4% in the year to the end of September placing the illustrious city in perfect steed for continued house price growth all the way through 2021.
Certain regions of the UK became subject to local lockdowns after a three-tier system was introduced across England in October. Despite setback after setback, the housing market proved its resilience with the average UK house price reaching a new high in October, climbing 7.5% higher than the previous year, according to Halifax. In the thick of Covid-cutting headwinds, this was the strongest recorded annual growth since June 2016.
There was also a second national lockdown during the rocky month of November, completely different to that of the first lockdown. This time, the housing market remained open with estate agents and letting agents given the green light to continue their “business as usual” approach, all the while adhering to Covid safety guidelines. Most opted to conduct extensive virtual viewings to ensure that buyers and sellers were able to progress with their transactions. As far as housing developments were concerned, all construction sites were also instructed to remain open. And once again, the housing market continued its run of bouncebackability with annual house price growth accelerating from 5.8%in October to 6.5% in November. According to Nationwide, this was the highest figure since as far back as January 2015.
A significantly more stringent three-tier system was then introduced at the beginning of December. Typically speaking, the housing market faces a seasonal slowdown at the end of the year so naturally, a stunt in growth would have been a plausible end to 2020. However, the second lockdown has only reaffirmed people’s desire to move, which has equally led to the busiest December in over a decade. And now, the Covid-19 vaccination program has been rolled out, the nation has been lifted with hope and confidence towards the promising future ahead.
As previously touched upon, the Brexit agenda has somewhat taken a back seat since the outbreak of Covid-19. The government announced an extension to the transition earlier this month and after carefully drawn-out negotiations, the UK has finally agreed a Brexit trade deal with the EU. This comes as Prime Minister Boris Johnson and President of the European Commission Ursula von der Leyen concluded talks on Christmas Eve, a week before the transition period was due to end on 1st January 2021.
The shared concern and stark predictions towards Brexit and the housing market has largely been underpinned by the growing prospect of crashing out of the transition period without a deal. Needless to say, the economic ramifications of such proceedings would have inevitably sent shockwaves across unemployment, food prices, the housing market and so much more. Subsequently, last week’s historic agreement was well received by UK MP’s who unanimously voted in support of the deal which is set to replicate many of the important benefits enjoyed by EU members.
The news of a strong trade deal has also been welcomed by potential homebuyers and sellers across the country. This stems from the renewed certainty of the deal offering Brits much-needed stability, which has ultimately extinguished fears of a no-deal Brexit and a potential disruption to housing prices. Many experts believe that the imminent deployment of the Covid vaccine will give people even more confidence that life is returning to normal, and therefore more reason to make large investments.
In terms of mortgage rates, it’s now unlikely for these to be affected by Brexit. Mortgage lenders typically use the Bank of England’s base rate to determine how much they charge on a mortgage. The Bank of England’s base rate is currently at a record-low of just 0.1% due to the coronavirus pandemic. In normal circumstances, if Brexit caused the pound to drop the BoE might have decided to increase the base rate which would increase the interest paid on a variable-rate mortgage. However, they’re unlikely to do this in the context of a global pandemic.
David Hollingworth, associate director of communications at L&C mortgages, says: ‘Mortgage rates remain competitive, and this will help boost borrower affordability and confidence. However, there remains limited mortgage availability for those with smaller deposits. That is borne out by the current capacity issues, mixed with a degree of lender caution around how the economy will emerge from the impact of the pandemic.’
As we look ahead to 2021, the market is in an ambiguous position. There’s no doubting that the UK housing sector is still enjoying the effects of the post-lockdown mini-boom at a time when the Buy-to-Let market is continuing to thrive like never before. As regular Elavace readers will be all too aware, property prices are amongst the most important considerations to make before embarking on any property investment journey. Regardless, it’s also important to recognise that the rental market moves independently, bringing with it its own predictions.
Rental prices have proven time and time again to be more buoyant than house prices, especially during an economic downturn. Cast your mind back to the 2008 Financial Crisis, when average rentals fell by only 2% compared to house prices dropping by 18%. Taking this into account, Savills still believe that rental prices will rise by double figures by the end of 2024 – with the largest rise coming in 2021. JLL predict in their ‘City Centre Forecasts’ that the frontrunners for rental growth in 2021 are Birmingham and Manchester. These two cities are expected to see 3% rental growth next year, with Birmingham seeing16% and Northern powerhouse, Manchester topping the charts at 16.5% by 2024.
As supply continues to be outweighed by demand in the North-west, the rental market appears to present attractive opportunities for property investors in it for the long run. Meanwhile in the more near future, JLL also believe that similarly to the ‘Boris Boom’ effect, the UK property market forecast will reflect the momentum of increased economic and political certainty in 2021. This will significantly fuel both rental prices and future transactions.