House prices have soared once again in 2020, rising in November at the fastest annual rate in almost six years. But for how much longer will this continue? Experts think the tide will turn fairly soon, predicting a house price crash in 2021.
According to the Nationwide Building Society, annual house price growth rose to 6.5 per cent in November, the highest rate since January 2015.
The average house price in October 2020 stood at £227,826, but for November that figure rose to £229,721.
Experts believe the spike in house prices is partly down to people wanting homes with more space as they continue to work from home, during the pandemic.
Demand for homes that were located inside a natural park rose. Nationwide estimates that nearly 30 per cent of those considering a move were doing so to ‘access a garden or outdoor space more easily’. While 25 per cent were ‘looking to get away from the hustle and bustle of urban life’.
Furthermore, the stamp duty holiday has also been a major factor in pushing house prices up, with the holiday set to continue till March 2021.
Experts predict house price fall
Despite house prices continuing to rise in the back end of 2020, data and expert opinions suggest that the market will soon run out of steam.
Fuelled by rising concerns of unemployment and the scheduled end of the stamp duty holiday, signs indicate that house prices are set to fall sometime next year.
In September, the Centre for Economics and Business Research (CEBR) already predicted that there will be a massive slump in UK house prices in 2021, by nearly as much as 14 per cent.
‘Our analysis suggests that prices will start to fall significantly towards the end of the year and the first half of 2021 (though there might be a short spike as the stamp duty reduction comes to an end). With average house prices forecast to be 13.8 per cent lower in 2021 than in 2020.’
Experts say rising house prices ‘was never sustainable’
Property experts have also weighed in on the future of British house prices, with many siding with the CEBR’s predictions.
Rob Houghton, chief executive of reallymoving, said: ‘as predicted, the New Year looks set to herald a change in fortunes for the housing market following an exceptional summer and early autumn, which has pushed prices to record highs.’
‘But it was never sustainable. House prices cannot continue to defy macroeconomic influences such as rising unemployment, shrinking economic growth and the prospect of a No Deal Brexit at the end of the year.’
‘While we will continue to see positive growth through to Christmas based on deals already agreed, momentum is now slowing and we expect to see a reversal in the recent spike in house price growth over the first quarter of 2021,’ explained Houghton.
The chief executive warned that first-time buyers with small deposits, the self-employed and those on furlough would find it hardest to secure mortgages in 2021. He also intimated that the government may need to step in to support first-time buyers.
Jacqueline Dewey, CEO of Smart Money People told Financial Reporter she is waiting to see what happens to UK houses prices, particularly after March 2021 when the stamp duty holiday ends.
‘It will be interesting to see whether their predictions are correct when we consider that the recession could deepen next year’, explained Dewey.