Updated: Jan 12, 2021
What a year 2020 has been. Despite the majority of the year under the pandemic, the housing market performed remarkably.
In this blog, we review the housing performance in December, reflect on the remainder of the 2020 and look forward across 2021.
Who could have predicted the performance of the housing sector last year? No one, at least accurately. 2020 saw unprecedented activity in the housing market, with the average house prices ending the year up as follows - 3.9% according to Zoopla, 6% according to Halifax and 6.6% according to Rightmove. An incredible outcome, given the significance of the pandemic.
The indications so far for 2021, are that the market will be busy at least until the stamp duty holiday and the help to buy schemes come to an end on 31 March 2021. Coupled with the wider economic impacts, there will be a slower performing year ahead after that. Despite that, year end forecasts indicate an increase is average property values of - 1% according to Zoopla and 4% according to Rightmove.
The priorities for 2021 will remain in terms of what buyers will be looking for - the key priority remains that is to have more space, including outdoors.
December 2020 Performance
As usual, we take a look at data shared by Rightmove, Halifax and Zoopla.
Rightmove have a unique perspective on the market, given the volume of sales they have listed. Their December data covers approximately 95% of the UK housing market.
Average house prices in December were down -0.6% compared with November, with the national average of property achieving £319,945. Despite this drop, year end average prices were up 6.6% compared to 2019. An incredible and unexpected outcome given the pandemic.
Around 130,000 sales were agreed in December, up by a remarkable 44% on the same period in 2019!
When you look at the average by sector, property prices dropped the highest at the top end of the market, with house prices decreasing by -1.4%.
Looking back over a 5 year period, it is evident that property values in 2020 surpassed that of the previous years, despite the dips that crept in from September.
In December, the average number of days to obtain an offer was at 52 days, an additional 3 days compared to November. However this was still 19 days less than in December 2019!
In terms of outlook for 2021, Rightmove forecasts an average house price growth of 4%. This is due to housing priorities remaining high on households agendas. Rightmove expect Q1 to be busy as householders clamber to meet the end of the stamp duty holiday which ends on 31 March 2021.
There are currently 650,000 of properties changing hands according to Rightmove. With the end of the stamp duty, Q2 is expected to be slower although ongoing demand and low mortgage rates will keep the market moving.
Tim Bannister, Director of Property Data at Rightmove says:
"2021 has a lot of variables, and so is not an easy one to call, but with Rightmove’s unique leading indicators of buyer and seller behaviour we are confident that the housing market will continue to outperform general expectations next year as it did this. Our 2021 forecast of a 4% price rise is more conservative than the unsustainable 6.6% national average seen this year. There’s likely to be a lull in quarter two unless the stamp duty holiday is extended, but for many buyers its removal will not be make or break, though may lead them to reduce their offers to a degree to compensate for the higher tax, and indeed many sellers may be prepared to help to mitigate their buyer’s financial loss.”
“Despite these headwinds, ongoing demand still remains very high, indicating that there’s plenty of fuel left in the tank for the housing market. Interest rates remain at near-record lows, and we expect greater availability of low-deposit mortgages at competitive rates next year. These two factors will help to oil the wheels for home purchases by the ‘accidental savers’ who have collectively saved £100 billion that they couldn’t spend during the pandemic restrictions. With the expectation of a return to more normality in the second half of 2021 and a likely ‘fresh start’ mentality for some, there are sound reasons for continued positive market sentiment that will outweigh the economic, political, and health challenges ahead. Rural, countryside, and coastal demand will remain high for those re-appraising their lifestyle, but more normality will also help the recovery of those aspects of city-living that have seen a dip in their appeal.”
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The average house prices in December according to Halifax were 0.2% higher compared to November and 6.0% higher compared with December 2019. This resulted in an average house price of £253,374.
Russell Galley, Managing Director, Halifax, says:
“Average houses prices rose again in December, stretching the current run of continuous gains to six months. However, the monthly rise of 0.2% was the lowest seen during this period and significantly down on the 1.0% increase in November. The average house price was therefore little changed, but nonetheless still reached a fresh record of £253,374.
2020 was a tale of two distinct halves for the housing market. Following a strong start, the first half was dominated by the restrictions on movement due to COVID-19, and prices were subsequently down 0.5% at mid-year as the market effectively ground to a halt. However, when the market reopened, prices soared as a result of pent-up demand, a desire amongst buyers for greater space and the time-limited incentive of the stamp duty holiday. All this left average prices sitting some 6.0% higher at the end of 2020 when compared to December 2019, a notably strong performance given the anticipated impact of the pandemic earlier in the year. Whilst the annual rate of inflation did fall compared to November (+7.6%) to stand at its lowest level since August, it should be noted that this also reflects a particularly strong period for house prices towards the end of 2019 as political uncertainty at that time began to ease."
Halifax expect sustained prices at the outset, however with the economic impact of this third lockdown and unemployment rises expected, they expect pressure on housing prices the further we move through the year.
Russell Galley, Managing Director, Halifax, says:
"In the near-term, and with mortgage approvals still sitting at a 13-year high, there may be enough residual strength in the market to sustain prices up to the deadline for the stamp duty holiday and the scaling back of Help to Buy at the end of March. However, with the pace of the UK’s economic recovery expected to be constrained by the renewed national lockdown, and unemployment widely predicted to rise in the coming months, downward pressure on house prices remains likely as we move through 2021.”
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Buyer demand as at 21 December 2020 was 40% higher than it was at the same time in December 2019, with the market defying the traditional seasonal slowdown. As a result, UK house price growth increased by 3.9%, the highest level since August 2017, and up from 1.3% compared to December 2019.
Sales were up 9%. The strong rebound in sales activity in southern England, pushed the total value of homes sold in 2020 up 26%, to a total value of £300bn.
More space has been an underlying priority for buyers as households re-evaluate their housing requirements. Demand for family housing with gardens, parking and extra space to work from home continued to rise. Houses have seen an annual price increase of two times that of flats as indicated below.
Zoopla expect a strong start although recognise that the housing market cannot be immune from the wider economic factors. As a result, they expect price growth to slow to +1% by the end of 2021.
A recent consumer survey by Zoopla indicated that 44% of households plans were not influenced by the stamp duty holiday - these buyers are instead focused on the need to relocate and find more space and a better location to live.
Zoopla expect that older, equity rich, long-time owning households will continue to take a growing share of sales. They also expect the number of completed housing transactions to match 2020 levels at 1.1m.
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We hope you enjoyed this summary of the 2020 housing market and the outlook for 2021. What's certain, is we should expect the unexpected again and look forward to another incredibly interesting year of data to digest.
What is your perspective on the housing market in 2020 and the forecasts for 2021? Let us know at email@example.com. As always, we look forward to hearing from you.