Reading Time: 7 minutes

UK housing market boom continues through 2021

The UK property market boom is continuing well into 2021, as anticipated by investors. The UK Nationwide house price index increased by 13.4% in June year-on-year, which is the largest rise since November 2004. The price rise largely comes down to property buyers frantically completing their purchases before the end of the stamp duty holiday deadline on 30th June 2021.

The UK economy is bouncing back much more strongly than previously predicted. During 2020, UK investors expressed their nerves over the UK’s economic outlook due to a combination of Brexit uncertainty and the impact of the COVID-19 pandemic.

According to a survey of 1,000 UK-based investors by FJP Investment, all of whom have investments of more than GBP 10K in the country (excluding residential property and workplace pensions), 62% feared that the British government’s handling of the coronavirus crisis would result in a long-term recession.

At the same time, 41% said they were concerned about the impact a no-deal Brexit would have on their investments while less than half of those surveyed believed the UK would remain a global investment hub following its departure from the European Union.

However, 51% of survey participants said that UK real estate would remain appealing irrespective of the coronavirus or the post-Brexit relationship between Britain and the EU.

Although the Coronavirus pandemic has exerted pressure on the UK housing market, 40% of investors surveyed believed house prices will continue to surge going into 2021, opposed to the 19% who believe property prices will fall.

Of all the properties worth buying, research carried out by property developer, StripeHomes, shows that new-build properties will be a great investment as they command the highest premiums.

image of letters spelling investment. Concept of real estate investment in 2020

New-build properties offer a significant investment opportunity

While property prices for new-build homes have declined since the start of 2020, opportunities in the market remain promising, as new-builds are still securing a 26% price premium when compared to the average cost of existing properties in the UK.

Data from StripeHomes shows that new-builds in the North East are offering the best investments, followed by the East Midlands and West Midlands, with recently built homes in the latter two areas selling for 35% and 34% than existing property in the area.

That being said, nothing is certain in property investment as the COVID-19 pandemic has created a more complex picture for the outlook of the UK housing market.

There has been a significant rise in UK property prices since May 2020, which was when the country began exiting its first national lockdown. Chancellor Rishi Sunak’s stamp duty holiday added a welcome boost, bolstering activity in the housing market among domestic and foreign buyers.

UK property prices then experienced a sharp decline as the country entered its second national lockdown. However, property prices were still 34% higher than they were during the same period a year ago.

According to the UK’s largest mortgage lender, Halifax, housing prices rose by 7.5% year-on-year in October 2020 at GBP 250,457 – which represented the most significant jump in housing prices since 2016-end.

However, the question remains as to whether the UK’s housing market boom will continue now that Rishi Sunak’s stamp duty holiday has entered its next phase?

What to expect from the UK property market now and post-2020

Will 2021 see the end of the UK housing market boom?

The UK’s leading property group, Zoopla, described 2020 as a “rollercoaster year”, due to yo-yo-ing housing prices triggered by national lockdowns and the stamp duty holiday.

Housing prices plunged after UK Prime Minister Boris Johnson’s second national lockdown in England renewed fears over the UK economy’s outlook but rebounded swiftly amid high demand and property availability.

Zoopla forecast that December 2020 would be the busiest month for the UK property market in over ten years, albeit the company warns that only “50% of property sales agreed in January will receive the stamp duty holiday benefit.”

The first quarter of 2021 recorded more than 100,000 additional property sales as buyers rushed to finalise deals before the stamp duty holiday’s previous deadline in March.

It’s anticipated that UK property demand will slow down now that the savings on stamp duty have concluded, and the furlough scheme winds up in September. The stamp duty threshold during the holiday was raised to GBP 500,000. This figure has now been halved to GBP 250,000. It will then revert to its normal level of GBP 125,000 on 1st October 2021.

Heather Powell, head of property at Blick Rothenberg, noted that the average housing price in England is seven times more than the average salary across the country, and thirteen times the average salary in London.

If unemployment spikes following the termination of the furlough scheme in September, mortgage lenders will have no choice but to reduce house prices in order to support the market.

The Office for Budget Responsibility (OBR) previously warned that the uptick in housing prices will reverse by more than 8% in 2021 as this year’s ferocious demand dissipates.

Tom Bill from Knight Frank stated that whilst the UK property market would take a financial hit as the stamp duty holiday winds up, the event also signals a return to normality. As a result, the second half of 2021 should see healthy levels of activity in the UK housing market.

UK housing market prices 2021

UK property prices likely to continue rising

Post-Brexit woes led to speculations that the UK property market would face mounting pressure. However, Bank of England (BoE) Chief Economist, Andy Haldane labelled the UK housing market as currently being ‘on fire’.

Halifax highlighted that the average property price in the UK is currently GBP 261,743, which is the highest on record.  Russell Galley from Halifax stated that property prices could continue to increase after June, with many Briton’s building up “unexpected” savings during lockdown, potentially using funds to put towards larger deposits on more spacious properties.

The ongoing issues with Brexit negotiations can pose a challenge to investors who are trying to plan for future investments, with some turning to safer options for investments.

Aside from Brexit, other factors, such as the unemployment rate and availability and rise of the Delta COVID variant could potentially pose a threat to the progress of the housing market outlook for 2021.