Will there be a house price crash in 2021? Experts share their predictions

House prices are soaring right now, but for how much longer?
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  • UK house prices are continuing to rise, breaking every record going and subverting every prediction of a house price crash in 2021. However, many property experts are continuing to predict a slowing down of the housing market.

    As the stamp duty holiday starts to wind down towards its end in September, and Halifax house price index report the first drop in house prices this year could the house price crash warning for 2021 finally be on the cards? We’ve spoken to property experts to reveal what will happen to house prices in 2021 – and beyond.

    Will there be a house price crash in 2021?

    There is a solid consensus among property professionals that we don’t need to panic about a house price crash in the immediate future.

    ‘The past 18 months has seen many of us re-evaluate what we want from our homes,’ shares Gráinne Gilmore, Head of Research at Zoopla. ‘The ‘race for space’, alongside a surge in demand caused by the stamp duty tax holiday, has boosted property prices despite ongoing uncertainty over the pandemic.’ 

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    Image credit: Oliver Gordon

    The reopening of summer travel may result in a slight ‘moderation’ of house prices, but Gráinne is careful to point out that they expect growth to remain in positive territory for the rest of this year. This is due to a continuing influx of more and more buyers into a market where supply is scarce

    ‘More buyers will embark on making a move over the summer, particularly as businesses begin to confirm long-term flexible working practices for office-based workers, giving many homeowners more options when it comes to choosing where to live,’ she explains. ‘In addition, first-time buyers are becoming more active in the market.’

    Mike Scott, Chief Analyst at estate agency Yopa, elaborates on this point, saying: ‘It’s clear from recent house price indices that the momentum of the housing market is still building as we move towards the end of lockdown.’

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    Image credit: David Merewether

    ‘While there will undoubtedly be a slowdown in the rate of activity after the recent stamp duty deadline, we don’t expect this to lead to any price falls. Prices are likely to keep rising for at least the remainder of 2021 – and probably into the early part of 2022 – as supply is still very limited and people are looking to move on with their lives after the pandemic, which for many will mean moving house.’

    The end of the exodus from cities

    To some extent, however, the fate of house prices will depend on regional specifics. Some property experts are predicting that even if house prices continue to rise, they will do so much more slowly in rural areas that spiked in popularity with buyers during the pandemic.

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    Image credit: David Parmiter

    Chris Salmon, the Operations Director of conveyancing specialists Quittance Legal Services explains that they expect to see house prices in rural areas drop off with the end of the Stamp Duty Holiday and return to office. ‘Prices in these areas have been hugely inflated due to the exodus from cities when remote working began,’ he adds.

    Major cities, some of which have experienced a property market slowdown, are less likely to see any substantial house prices fluctuations either way. Chris Salmon believes that a major house price fall in urban areas is highly unlikely at this point – ‘drops in demand due to the end of the Stamp Duty Holiday should be offset by the reintroduction of 95% mortgages.’

    The post-October silver lining for buyers

    Although the UK is highly unlikely to see a house price fall, the rate at which house prices keep increasing is what really matters at this point. The end of the stamp duty holiday is the first marker of a very gradual slowing down explains Ross Counsell, chartered surveyor and director at property buyers, GoodMove.

    ‘Now the Stamp Duty holiday has come to an end (at least in its current format – there will be a staggered reduction in rates until September), we can expect to see a decline in demand for properties from October once the deadline officially ends, and with less demand comes cheaper house prices,’ he says.

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    Image credit: David Parmiter

    Some of this decline will be to do simply with the fact that many people who have wanted to move will have moved, leading to an overall decline in house transactions. ‘Mortgage approvals may also decline, as many people looking to have moved home in the past year would have already done so by now, fuelled by the desire not to miss the Stamp Duty Holiday deadline. This is great news for first time buyers especially those who may have struggled to buy a home in the past year.’

    Ross is optimistic about the housing market stabilising by the end of the year. ‘Although we cannot say for certain, I cannot foresee in any way house prices continuing to rise throughout the year,’ he says.

    ‘I believe we are coming to the end of unattainable house prices and the market will begin to calm down in the next few months, hopefully resuming normality post-October.’

    This means we may see something like a return to pre-pandemic house price growth rates of 1-4 per cent as opposed to the 10-per-cent rises we’ve seen in some UK regions over the past year.

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