Britain’s housing market has been on a particularly bumpy ride over the past few years and that trend looks set to continue throughout 2021 as the impact of Brexit and the global pandemic begin to bite.
Brexit and Covid19 put downward pressure on prices
Brexit has already caused significant instability across every sector of the UK economy, and the housing market has not been exempt. Despite managing to sign a last-minute trade deal with the European Union, which will have softened the blow, the long-term stability of prices remains uncertain.
A major driver of this uncertainty and likely downward pressure on prices is the prospect of unemployment, which analysis from Property Reporter estimates could rise to up to 7.5 per cent as the full impact of Brexit and the increased barriers to trade begin to be felt across the UK. Add to this the lasting effects of a global pandemic that has hit Britain’s population and economy particularly hard, and the next few years could see house prices fall.
Stamp duty holiday offers a short-term fix
However, the government’s decision to suspend stamp duty for properties of up to £500,000 until later this summer has given the market buoyancy. However, it’s a short-term band-aid for the problems facing the market, and the Guardian has recently forecast a five percent fall in 2021 as a result of Covid-19.
Freeports will move capital
New freeport bids may also affect the market due to taxes on imported goods. Property Reporter suggests that this could see the UK’s eight primary freeport locations enjoy a 13 percent annual property price increase. Those locations are Plymouth, the Solent, the Thames area, East Midlands Airport, Felixstowe and Harwich, the Liverpool City Region, the Humber region and Teesside. However, it is likely that the increase in prices at these locations could also cause downward pressure on house prices in other locations as people leave them for the ports.
International buyers help keep prices high
For years the UK housing market has been seen as a safe and lucrative investment for foreign buyers, and it is these buyers that have continued to push UK house prices higher and higher each year despite signs that growth should be slowing.
These buyers come from around the globe, but Asia has been major source of capital over the last few years. A recent report by the Buy Association found that Hong Kong buyers were the busiest foreign customers in the UK property market, spending £8.1 billion across 6,438 properties in the opening nine months of 2020, with London the most popular choice for investment.
Uncertainty is here to stay
The house price volatility that the UK has seen over recent years is expected to continue, at least in the short-term. Web-based tools including free valuation reports detailing price changes and trends can help in analysing properties with regard to postcode size, and area demand, but the reality is that for the first time in a number of decades the UK housing market is uncertain and buyers should be keenly aware that prices may go down as well as up.