Whatever way you look at it, the property market had an exceptional year in 2020.
It went from trundling along quite nicely in the first three months of the year, to a complete three-month shutdown during lockdown - during which time dire predictions were made about a coming crash. Against the odds, house prices surged after the market re-opened in July, thanks to the Government's stamp duty holiday and lockdown fuelling people's desire to move. In the UK as a whole, the average price of a home rose to a record £249,633 in November, up from £231,100 a year earlier, said the Office for National Statistics. It was the highest annual rate of growth since the Brexit referendum in June 2016.
The blistering annual price growth recorded in November is a huge leap on the rate seen in October, but commentators warn that price growth could now slow, with the January lockdown leaving the market more like a parked car, with the handbrake on but the engine revving loudly'. Current thinking is that the withdrawal of the furlough scheme, mortgage payment holidays and the return of the stamp duty threshold to former levels was likely to leave prices about 2% lower by the end of the year. But there are mitigating forces at play.
The pandemic forced many of us into stay-at-home lifestyles, which made people discontented with their existing properties and keen to move to a bigger and better place. Crucially, many middle-class professionals can afford to turn those desires into reality, having hung on to their jobs and racked up large sums in lockdown savings. The EY Item Club, which bases its forecasting on Treasury models, is predicting a 5 per cent fall by the end of this year, as does respected think tank the Centre for Economic and Business Research. But if the vaccine roll-out is successful and the economy is brought out of the deep-freeze, the market may well prove the pessimists wrong, as it has consistently over the last 30 years.
Mortgages are likely to remain affordable and interest rates are not expected to be hiked any time soon ' indeed, they may even fall further. And, with returns on savings virtually non-existent, for many property will continue to look like an attractive investment.
About the Author: Glen Callow
