Halifax has revealed its UK housing market outlook for 2021. Their latest predictions reveal that next year could see house prices drop as unemployment levels rise and the furlough scheme comes to an end. Russell Galley, Managing Director at Halifax said the market this year has remained buoyant despite the coronavirus pandemic having a detrimental impact on the economy.
This year has seen house prices rise at their fastest rate since 2016, with mortgage approvals also at their highest levels for over 10 years.
Mr Galley explained that the property market boom has largely been driven by the stamp duty holiday, with people bringing their transactions forward to 2020, rather than waiting until next year.
More people working from home has also led to a “shift in demand”, according to Mr Galley, as more people desire space.
He added: “Unprecedented government support for furloughed workers and the self-employed has prevented a sharp fall in earnings for many households.”
READ MORE: House price drop ‘inevitable’ claim experts
All these factors could see lower levels of demand and activity in the property market.
The stamp duty holiday began in July and is due to end on March 31.
The SDLT holiday means that homes bought for less than £500,000 are exempt from paying the tax.
There have been calls for the holiday to be extended but the government has confirmed the March 31 deadline will remain in place.
The housing expert said although the roll-out of a covid vaccine could help the economy recover, the unemployment rate could also rise.
He continued: “Taking all of this into account, the post-summer surge in house prices is unlikely to be sustained.
“Prices are expected to fall by between two percent and five percent next year, although forecast uncertainty is much higher than usual given the current economic and political environment.
“It is also important to note that such a fall would only partially reverse the almost £18,000 (7.6 percent) increase in average prices experienced over the past 12 months.
“The key long-term issue for the housing market remains the inequality between generations and across the income spectrum, and specifically the ability of the young and lower-paid to access good quality housing that meets their needs.
“The impact on the economy of COVID will therefore only increase the need to prioritise improved housing availability and affordability.”
The average house prices in the UK is now £253,243 – this is a rise of £17,890 compared to £235,353 a year ago.
Annual house price growth this year has also grown by 7.6 percent which is its strongest level since June 2016.