Over the last few months the housing market has defied expectations. Not only have house prices grown, but they have accelerated during the pandemic. However, the latest Nationwide house price index warns of a drop off at the start of 2021.
Although the housing market looks to be going from strength to strength largely due to Government support via the Stamp Duty holiday, many experts, including Nationwide, have expressed concern about what will happen when the tax break comes to an end.
‘Housing market activity is likely to slow in the coming quarters, perhaps sharply, if the labour market weakens as most analysts expect, especially once the stamp duty holiday expires at the end of March,’ explains Robert Gardner, Nationwide’s Chief Economist.
Also read: UK house prices reach an all time high – but the Halifax has this warning
A decline in market activity could lead to the house price drop that has been predicted since the first lockdown, but has yet to fully manifest. In fact, Rightmove has already reported a month-on-month fall in asking prices as many sellers try to move their homes ahead of the Stamp Duty holiday deadline in November.
‘The outlook remains highly uncertain and will depend heavily on how the pandemic and the measures to contain it evolve as well as the efficacy of policy measures implemented to limit the damage to the wider economy,’ adds Gardner.
‘Behavioural shifts as a result of Covid-19 may provide support for housing market activity, while the stamp duty holiday will continue to provide a near term boost by bringing purchases forward.’
In the last month annual house price growth has accelerated from 5.8 per cent in October to 6.5 percent in November. This is the highest since January 2015. House prices have also risen by 0.9 per cent month-on-month.
Nationwide isn’t the only house price index warning of an end to the pandemic house boom. In the latest Halifax report, house prices were shown to have risen by 5.3 per cent in the last four months. However, it also warned that the rising prices was unlikely to continue.
Nothing about 2020 has been certain, especially not the housing market. We’ll just have to see what 2021. However, if you are looking to sell, we’d advise jumping now rather than later.