House prices are set to rise by 2% in 2020, but the “real challenges won’t be felt until 2021,” according to the latest research from Hamptons International.
Hamptons says that pent up demand and the stamp duty holiday will support prices in 2020.
By early June, there were more people looking to move home than at the same time last year. And following the July announcement of a nine-month stamp duty holiday, buyer numbers were up by double digit percentages in every region, with the largest increases in London and the South.
And it’s these late summer sales that will form Q4 completions which Hamptons’ house price forecasts are based on. The firm expects house prices in Great Britain to rise by 2.0% in 2020, up from 0.9% in 2019. Its research shows that Wales (3.0%) followed by London (2.5%), Yorkshire & the Humber (2.5%) and the North West (2.5%) will see the strongest house price growth in 2020.
However, Hamptons says that the economic fall-out from Covid-19, alongside rising unemployment and the end of the stamp duty holiday, will disrupt the housing market next year.
Hamptons predicts that Q2 2021 “is likely to be challenging and we could see small price falls”. However, towards the end of the year the economy and housing market should stabilise.
Providing the availability of mortgage finance returns to near pre-Covid levels, Hamptons expects house prices to remain flat in Great Britain in 2021, with small price falls in those regions likely to see the biggest job losses and where affordability barriers are already tight.
The West Midlands, the region that had the highest furlough take-up rate at the peak, is set to see the biggest price falls next year (-1.5%). The data also forecasts small falls in London (-1.0%) and the East Midlands (-0.5%). Meanwhile the remaining six regions will see prices rise between 0.0% and 1.0%.
In 2022 and 2023, the housing market is expected to return to its longer-term growth path, with prices rising by 2.5% in 2022 and 3.5% in 2023.
Over the four-year period, Hamptons expects the West Midlands to record the weakest house price growth, due to the effect of Covid-19 on the local economy, with prices expected to rise 4.5%. The North East is predicted to see the biggest price rises over the next four years, rising 11.5%, while London will underperform the average growth rate in Great Britain, seeing growth of 6.0% by 2023.
Aneisha Beveridge, head of research at Hamptons International said, “The housing market’s strong start to 2020 soon came to a halt with the rise of Covid-19. But after seven weeks of lockdown the market began to recover quickly. The market was buoyed by pent-up demand going back to 2016 as well as a rise in the number of households making lockdown-induced lifestyle changes, all topped off by a stamp duty holiday. We believe house prices are set to rise across Great Britain and will end 2020 having picked up from where they started at the beginning of the year.
“But the real challenges won’t be felt until 2021. The economic consequences from the Covid-19- induced recession will pull the housing market from its long-term growth trajectory. While some economic recovery should have taken place to cushion the withdrawal of government support, we still expect the housing market to slow next year.
“In line with a gradual economic recovery, we forecast house prices to rise again in 2022 and 2023. The housing market will fall back in line with its historical cycle, with Northern regions expected to see the greatest price growth, further closing the gap with those in the South.”