Last year was perhaps the most unpredictable the property market has seen, thanks to the pandemic and its effects on the UK economy. However, the housing and rental market stayed remarkably resilient, with a surge in demand driven by the pause on Stamp Duty, and UK house prices experiencing the biggest monthly rise in 16 years.
Now that a Brexit deal has been confirmed, this has removed one area of uncertainty. However going into another lockdown, and the Stamp Duty holiday still set to end this March, it is likely there will be just as much change for the property sector in 2021.
Lenwell's experts have laid out their predictions for the year ahead.
Property market will largely stay resilient
One of the biggest questions over the property market for the coming year is: “How will housing prices change?”. An all time high in demand for property was reached during the summer 2020 peak, with properties selling for or above the asking price. With the Brexit deal agreed, and vaccine delivery in progress, 2021 is looking to remain positive for housing, despite the UK kicking off the year with a third nationwide lockdown.
Our prediction is that house prices may soften slightly, but will stay resilient and stable in 2021, particularly for three- and four-bedroom houses. There will be regional variations and we are likely to see prices in some areas rising.
Rents, meanwhile, are easier to track as they can’t outpace wage growth, therefore Lenwell expects to see a steady increase of one-two percent in 2021. However, as with house prices, this is likely to be lower in bigger cities, where we are seeing less demand, and be higher in suburbs or on city outskirts.
Stamp duty holiday extension
We’ve already seen calls to extend the stamp duty holiday extension deadline from the property sector, and that announcement would really encourage continued momentum in property sales next year, as well as provide a welcome boost to the wider economy.
Further growth in demand for surbuban living
Starting the new year at home under lockdown will lead many to go in search of more space, looking for gardens and separate areas to enable easier working from home or to home-school children. We are likely to see a continued ‘escape to the suburbs’ in 2021 in order to upsize to these larger properties. Conversely, we are already seeing reduced demand for flats in city centres, while we expect the desire for properties, both to buy and rent, in suburbs to continue to grow.
Both house buyers and renters will increasingly seek homes in areas around one hour away from big cities, with good transport links, facilities and lots of green space.
More homeowners will embrace the let-to-let-market
Following the trend for upsizing, many homeowners will become both landlord and tenant next year in order to obtain a bigger property and more green space. According to Rightmove, home movers are having to pay almost £68,000 on average to move from a two-bed flat to a three-bed house – £4,000 more than in 2019. With the cost of trade-up moves rising and mortgage lending extremely competitive in the current market, we foresee that homeowners will choose to let out their existing property and rent a bigger house in order so they can quickly get the spacious home they want, within their budget.
Originally popular following the 2008 financial crash, the let-to-let option will be increasingly used by homeowners this year. In particular among those in leasehold flats, or for those with properties seeing less demand who are finding it difficult to trade-up.
The Brexit deal won’t affect the property market
The Brexit deal, now that it has been confirmed, is unlikely to have much of an impact on the sector in the short term. House prices will likely be more impacted by the country’s economic recovery from COVID-19 and job uncertainty. Only if the Brexit deal causes wider job losses in the longer term could this potentially affect house prices, but in the short term, we will likely continue to see stability.
Virtual viewings will continue to shape how we move home
We don’t expect virtual viewings to take over the viewing process completely – buyers and tenants jumped back pretty quickly to wanting to physically view a property when lockdown restrictions were lessened last year - however they will remain a strong part of the sales and lettings process in 2021.
The ease and convenience of video tours will help reduce the time needed for wasteful viewings across buyers, sellers, landlords and tenants.
Open Banking will completely change tenant management
In lettings, we expect to see more agencies embrace Open Banking and online customer accounts for maintenance to speed up tenant reference checks, payments and maintenance resolutions. We have recently introduced Open Banking-based tenant referencing across our rental portfolio.
Our agents are able to use this technology to scan a prospective tenant’s bank account transactions, if they grant permission, and determine their rent payment history instantly. This will allow landlords and agents to turn around affordability checks in minutes, and provide better lettings management throughout tenancies.
There’ll be an uptick in buy-to-let investments in residential property
With so many companies continuing to work from home for much longer into the future, downsizing on office space will be on the priority list for many commercial property tenants. This uncertainty in the commercial sector will lead many landlords and investors to diversify their portfolio and, in order to minimise risk, invest in more residential property developments.
In a similar way we expect landlords diversifying their direct-to-residential lettings, from one- and two-bedroom flats into three- or four-bedroom houses to secure their investments, matching the currently seen demand for larger properties. With interest rates low and the stock market volatile, property is still one of the few places that people can secure investment in for the longer term, so the buy-to-let market will continue to be buoyant.
Online estate agencies will dip in popularity
In a market that is constantly changing, vendors will desire local expertise from their estate and letting agencies. We predict a shift away from online-only agencies, which currently account for only around 8% of all transactions, towards those with a high street presence.
Another year of change
Despite the fluctuations in the economy, the housing and rental markets will stay buoyant next year – especially following support from additional Government measures, such as the extended furlough scheme and the potential extension of the Stamp Duty Holiday. Last year the property industry had to adapt quickly, and this has set us in good stead for this coming year.
The pandemic has changed how we all think about our homes and where we live, possibly forever. At Lenwell, we are ready and prepared to support our customers navigate through the changes in 2021.