Buy a House, or Stay Put in 2021?

2020 has been an incredible year for house sales. Property prices have risen to unforeseen levels across the country, with the average UK property price now exceeding £250,000 for the first time. Demand outstripping supply has become something of an understatement in 2020, with many properties selling before being properly advertised. Property investor activity has remained buoyant and, despite, or because of COVID-19, houses have been selling like the proverbial hotcakes. So, the question that many people are asking is, what does 2021 hold for those thinking of moving house?

Why has 2020 Been Such a Strong Year for House Sales?

Before looking forwards, it’s important to look at the reasons why the property market has bucked every other economic trend since March when COVID-19 exerted its grip on society. When lockdown 1 was first implemented, it felt like time was standing still. It’s not that long ago when the roads were as empty as supermarket shelves, as the fear of the pandemic gripped everyone. Shops and businesses were forced to close, and any house sales or purchases were put on hold. Rightly fearing impending economic carnage, the Government was quick to act with job furlough schemes, emergency business loans, and much more.

House sales have always stimulated trickle-down economic activity and, whilst Government intervention in the property market has historically not ended well, a freeze on stamp duty was rushed into place as a minor economic stimulation insurance policy.

With interest rates being staggeringly low, this triple whammy that included post lockdown pent up demand created a surge in sales that is only just being satiated. Estate agents didn’t know if they were coming or going, and many couldn’t see any end to the utopia as they gorged on enquiries and completions.

However, economists were already forecasting the inevitable way back in summer. The sustainability of sales at this level was impossible to maintain, and, with an inevitable recession looming, house price falls were predicted.

The housing market continued to defy these predictions, as many mid to high range house buyers acted quickly to save hefty stamp duty fees. Easy access to a low rate, low deposit mortgages continued, and all looked rosy in the garden. Until just these last few weeks.

Time has pretty much run out to process a house sale quickly enough to take advantage of the stamp duty savings, which are destined to end in March 2021. But, of far greater impact has been the availability of mortgages. Initially becoming scarce due to supply and demand, but in September and more so in October, lenders awoke to the predictions of the worst recession in 300 years about to start. With the economy taking a battering like never before, lenders realised that once unemployment really started to kick in, and furlough schemes end, with the knock-on effect of small businesses collapsing, the housing market would slow down significantly.

The availability of 5% deposit mortgages disappeared overnight, 10% deposit mortgages became scarce, and many lenders started to forecast house prices falling, with Lloyds predicting a 20% drop in house values in 2021. And as sure as eggs are eggs, we now sit just a few weeks before Christmas with house sales falling through, many houses being put back on the market as crazily high valuations are being realistically downgraded, and as mortgage products are being tightened up significantly.

Buying Houses in 2021.

So, the above may sound gloomy for those wanting a bigger garden, home office or simply a change of scenery. One thing that the pandemic has taught people is how to work from home, and charging around the country in cars and trains for those sales and production meetings may not have been totally necessary. So as the home morphs into a part-time workplace, should people be thinking of moving house in 2021, and how will the landscape look.

Initial forecasts of recession, unemployment, and a house price crash certainly look gloomy. Nobody wants to hear that their house has lost 10, 15 or even 20% of its value. However, what’s important is the cost to change. Invariably, people move house into a property of a higher value. Like for like depreciation means that the buyer will be advantaged more as the house that they are buying will have lost proportionally more money. And, of course, first-time buyers will be delighted.

Cheaper houses bring choice, affordability as well as lower mortgage payments. A realignment of house prices was on the cards pre-pandemic anyway, and Covid-19 has expedited the process. A wider range of more affordable properties has to be a good thing?