Gloomy predictions of a slowdown in the housing market towards the end of the year were completely blown out the water this week. Instead, the housing market enjoyed its busiest and best Christmas in more than a decade.

According to the Bank of England more than 100,000 households were given the go-head to go forth and buy property in November. At 104,969 mortgages, it was the largest number granted since summer 2007. It also exceeded predictions by more than 20,000.

Of course, the Stamp Duty Holiday had a huge impact, as did the desire for many city dwellers to move to a bigger house and greener surrounds, following lockdown and home working.

And as for 2021? The end of the Stamp Duty Holiday is, of course, expected to see a decline in the number of house purchases. And no wonder – from October to March this year, buyers could save up to £15,000 on a house purchase – an incentive for anyone who’d been planning to move house last year. 

But more telling yet, will be the end of the furlough scheme in April. Thanks to the roll out of the vaccine, this is expected to be the last coronavirus ‘jobs rescue scheme.’ Unemployment figures are then expected to be rise and it’s this which is expected to have the biggest impact on the market all year. 

The uncertainty of house prices

Meanwhile, one of the big lenders Nationwide, reported a 7.3% rise in house prices year-on-year in its final House Price Index of 2020.

But could 2021 be a different story in this respect? Well, not according to property portal Zoopla, which confidently predicts a 1% rise. Tell that to the Centre for Economics and Business Research (CEBR) though, which expects a 5% drop.

Brexit no longer a threat to property market

Even Brexit is no longer viewed by many as a big challenge to the property market after a last-minute deal was secured on Christmas Eve, making the economic future seem far less rocky.

Mortgage availability, together with low interest rates, is in the property market’s favour. Both of these are firmly in place at the moment, with more mortgage products appearing daily. There are even suggestions that the Bank of England base rate may go even lower, resulting in negative interest rate territory. The reason being that this would prompt more investment in the very much ailing UK economy. The Chancellor was facing around 2 trillion of a debt deficit at the last count.

New deal for first time buyers

Help to Buy has returned – but in a slightly different format. This time round first-time buyers will find a cap on New Build housing costs. Those properties eligible for the scheme will be capped at 1.5 times the average property price in the region. 

Once again, the funding will be 20% of the cost of the property, increasing to 40% in London. But crucially, stringent quality controls have been promised, together with a guaranteed new home warranty prior to purchase. It should encourage more first-time buyers to invest. The fact remains though that the number of houses being built here in the UK remains woefully short of its target to meet a growing need.

No-one can deny the UK property market has been riding high in recent months. Since the first lockdown was lifted in May, surveyors, estate agents and conveyancers have been kept busy and there is now a huge backlog of transactions following the high demand to sell and buy.

indeed, in October Halifax recorded a record average high in the price of property over the past year – year-on-year growth of 7.5%. However, break the figures down further and you will find houses – regardless of whether they are detached or semi-detached – faring far better than flats.

Houses twice as likely to sell

Analysis by property research company PropCast shows only 27% of flats listed are selling, compared with 44% of houses countrywide. Furthermore, flats in London are taking up to 70 days to sell compared to just 29 days for houses, according to upmarket estate agents Hamptons International. This is the first time in eight years that flats in the capital have been overtaken by houses when it comes to buyer demand. So, what’s causing the rush to ditch flats?

No prizes for guessing the biggest reason, say property analysts – it’s the desire for outdoor space as a result of the pandemic and the possibility of future lockdowns. Houses tend to have gardens, flats don’t (even if some of them do have a roof terrace or balcony). And, if they can’t get a house with a garden, then many inner-city residents at least want somewhere less polluted by people as well as somewhere they can be closer to nature. You’re talking about the suburbs and villages here – neither of which are known for their high concentrations of flats.

Working from home has also increased the desire for additional space, such as a third bedroom or loft space, which can easily be converted into a home office.

First-time buyer numbers down

Another reason for the declining popularity of flats is the reduced number of first-time buyers. Flats – especially studio and one-bedroom properties – are more popular with this first rung of the property ladder because they tend to be less expensive than houses to buy. In addition, since they are younger and typically single, these buyers don’t mind being in the heart of a city where all the pubs, restaurants and entertainment venues are.

There are fewer first-time buyers because there simply aren’t that many higher loan-to-value mortgages to go around. That means first-time buyers need more money for a deposit and, as we’ve learned over recent months, it’s the younger age group that has been hardest hit by the lockdown, with many tending to be employed in hospitality, retail and tourism. Data from the Office of National Statistics shows there are now 156,000 more unemployed 16-to 24-year-olds (referred to as Generation Z) since May.

Lockdown hits luxury apartment market

But it’s not just in the first-time buyer market that flats are faring poorly. Luxury apartments in the likes of inner-city London and quayside Manchester, Liverpool and Glasgow are also plunging in value in a bid to attract buyers. In London, the popularity of plush apartments has fallen by 1.8%. That’s because wealthier buyers are also opting for housing and green space in preference to high-rise living.

Even if we get that promised vaccine (or two) for Covid-19, will the popularity of flats ever recover? Not according to BuiltPlace analyst Neal Hudson, who predicts the end of the ‘property ladder’ thanks to the increase in value of houses compared to flats.

“The idea that you could buy a flat in a city centre and then, after a few years, trade up to get a house in the same area doesn’t work now for the vast majority of people,” he said.

What it does mean, though, is that people may move sideways (ie: to “further out” locations) rather than upwards in their current city or town.

Stopped in its tracks once again, England went into lockdown 2.0 last month. But you wouldn’t have realised had you just landed and caught a glimpse of the property market.

It was – and is – still open for (plenty of) business, with estate agents and potential buyers able to physically visit properties (having first viewed them online). And it is just as well the market is still up and running considering the huge rush to get thousands of property transactions settled before the Stamp Duty Holiday is terminated at the end of March 2021. Estate agents, surveyors and conveyancers are all currently complaining about a huge backlog of transactions.

The latest data from HM Revenue and Customs (HMRC) shows that 98,010 property sales have already gone through in September alone. That’s 21% up on August’s figures and down just 0.7% on last year (before Covid-19 or any mention of lockdowns).

Properties selling in 50 days, say Rightmove

Experience from the first UK-wide lockdown showed the closing of the property market merely built up demand so that, when restrictions were lifted, the buying and selling of property went into overdrive. And, seven months on, buyer demand is still strong – Rightmove recently reported most properties on their portal as selling within 50 days.

BOE mortgage approvals highest for 13 years

House prices are still up. Land Registry’s figures for August showed the average property was priced at £239,196 – that’s a 2.2% increase on August 2019. The Bank of England added to the glad tidings by announcing that mortgage approvals last month were the highest in 13 years.

Chancellor Rishi Sunak’s Stamp Duty Holiday for property worth up to £500,000 in England and half that figure in Scotland and Wales helped, of course. So too did Covid-19 itself, with those who had never considered moving now looking for a rural retreat, garden and additional room to use as work-from-home office space.

Property portal Zoopla reports that 31% of properties sold during the months of June, July and August were in rural areas, compared with just 18% in urban locations.

House prices may remain steady until March/April 2021

The buying overdrive will peter out at some point, and at which time house prices will almost certainly take a dip. But this isn’t expected to happen, at least markedly, until next year. Many in the industry believe the end of the Stamp Duty Holiday will bring about a change in the market. But who knows if the holiday will end in March – the chancellor has received a pleading letter signed by well-known trade bodies in the property industry asking him to extend the Stamp Duty bonanza by a further six months.

He has already extended the furlough scheme again, after all, with this latest extension due to come to an end around the same time as the Stamp Duty Holiday. It’s expected the former will result in job losses. However, the prospect of a nationwide vaccination programme may make the unemployment statistics far less severe than previously predicted.

And then there’s Brexit…

There is, of course, another major event for the UK which could potentially derail the property market. And that is the possibility of a no-deal Brexit – something else that is predicted to have a negative effect on the economy and result in job losses. As a result, it could slow down transactions in the property market and therefore reduce house prices.

Then again, the property market hasn’t just survived, but flourished as a result of the pandemic (at least in the short term). And, could it be that with the intervention of the new pro-European US president we may just get a longed-for Brexit deal, after all?

Will there – won’t there – be a deal? The guess as to which side the Brexit barometer line is far more likely to fall on changes pretty much daily. 

But one thing is for sure – regardless of what kind of Brexit we have, Britain’s exit from the European Union on December 31 this year will have some kind of effect on house prices. 

Just how much of an effect, and whether it’s anything to get concerned about, remains to be seen. After all, the property market managed to survive that spontaneous seven weeks shutdown earlier this year. Albeit, it was helped by a surge in house prices following pent-up buyer demand and the Stamp Duty Holiday. And, the latter, as we have all been told repeatedly, is due to end abruptly on March 31 next year (despite protests to the contrary).

Meanwhile, house prices are at a record high – Nationwide reported a rise of 6.5% for November while Halifax said the average UK house price is now a record £253,243. And that’s not all; mortgage approvals are at a 13-month high.

But, getting back to Brexit… a few property experts have their own opinions on how much an effect a Deal or No Deal Brexit will have. And it’s interesting to see those predictions don’t really differ too much.

More about transactions than prices

Anthony Codling, founder of property website Twindig, believes many property analysts are currently focusing on the wrong set of numbers. It’s more about house sales than post-Brexit house prices, he insists.

“If a Brexit deal or a Brexit No Deal leads to a rise in unemployment or more importantly a rise in the fear of unemployment, we would expect housing transactions to fall and remain at a lower level until the Brexit dust has settled,” he says.

“It is unlikely in our view that house price will fall significantly as a result of Brexit.”

Only London and the South East affected by No Deal Brexit

Nicholas Morrey from independent mortgage broker John Charcol reckons there will be a strong negative effect on house prices. But, this would be localised – to London and the South East. These southern regions, he adds, are ‘very sensitive’ to the results of Brexit whereas ‘the northern regions were in favour of Brexit from the off.’

He added: “I suspect the property market won’t be impacted anywhere near as much by a No Deal Brexit than people think. Certainly not in the short term. Potentially in the longer term.

“It’s just been dwarfed by the other factors going on at the moment. But to get a trade deal will increase confidence and hopefully make the property market more resilient.”

He believes a No Deal Brexit won’t affect the overseas property market too much since there isn’t a large number of overseas buyers clamouring to buy property in the UK anyhow. The Stamp Duty Holiday coming to end, he says, is more likely to have a bigger impact on house prices.

His sentiments regards the ending of the Stamp Duty holiday is echoed by HomeOwners Alliance Founder Paula Higgins. But she believes Brexit won’t necessarily put overseas buyers off, especially since a No Deal Brexit will weaken the pound, making UK property more attractive.

“History has shown that a No Deal Brexit may not have as much impact as we think it could,” she added, tellingly.