It is absolutely fair to assume that 2021 will have its fair share of uncertainty, especially concerning the property market in the UK. In 2020, when Covid-19 came into being, the housing market and the real estate market in the UK and all over the world were severely impacted. While we have seen many government schemes come into play to boost the real estate market and the economy as a whole, no expert can predict with any amount of certainty what the future of the UK property market holds. However, here are some important factors that will have an impact on the UK property market in 2021.
Stamp duty holiday
After the first lockdown, the government introduced the stamp duty holiday in July 2020 in the UK. The stamp duty holiday was a temporary suspension of the stamp duty that needs to be paid by the buyer when he or she purchases real estate. The government announced the stamp duty holiday to boost the buyer’s confidence, revive the real estate market and make housing slightly affordable. Due to its enormous success, the stamp duty holiday has now been extended till September 2021. Whether the government decides to further extend this temporary suspension on stamp duty and how the real estate market will react to the suspension or introduction of stamp duty will have a huge impact on the real estate market in the UK.
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Change in buyer demand
As more and more people have started working from home, there has been a significant shift in buyer demand and the priorities of the buyer. Earlier, potential buyers would look for properties in the city centre which are close to their place of work. Now, homeowners and potential buyers have started looking at properties in the outskirts and the boroughs. One reason is that homeowners and professionals are looking to shift into bigger places as they wish to improve their standard of living since they are not spending more time at home. Secondly, the average price of the property in the suburbs and boroughs is relatively cheaper than in the city centre, which allows homeowners and potential buyers to purchase spacious properties at affordable prices. Also, there has been an increase in demand for properties with spare bedrooms, maybe an outhouse or a garage space, to convert these spaces into work from home offices. This change in buyer demand will certainly play a big role in the future of the real estate market in 2021.
Low deposit mortgages
Earlier, it was very easy for first-time buyers and potential investors to get low deposit mortgages. However, due to the uncertainty of Covid-19 and the increase in unemployment, banks and lenders have drastically reduced the availability of low deposit mortgages, to a point where it barely exists in today’s lending market. However, the UK government has announced a mortgage guarantee scheme under which buyers and investors will be able to secure a mortgage by paying only 5 per cent of the deposit. Low deposit mortgages will have a great impact on the future of the real estate sector. If this scheme leads to an increase in the demand for housing and helps revive the property market, then it will be a game-changer for the real estate industry as well as for lenders and banks.
Read about the UK Housing Market via our Specialist Residential & Buy to Let Division
Change in the average price of property
What factors affect the price of property? First and foremost, the supply and demand of real estate and housing will play a big role in deciding the price of property in certain areas. Secondly, the availability of mortgages and the rate of interest will play a role in the number of properties that are actually sold. Due to the uncertainty around Covid-19, banks and lenders became very strict about their lending criteria, which took a toll on the housing market. And, the criteria started becoming stricter, the number of mortgages in the market started to fall, hence, there was a significant change in interest rates. Inflation and unemployment also play a big role in deciding the average price of property, as inflation rates and unemployment rates affect the economy as a whole. And of course, political uncertainty caused by Brexit also took a toll on the real estate sector. Therefore, multiple factors, such as the ones listed above, play a big role in determining the property’s average price, which will ultimately impact the UK real estate industry.
Source: News Anyway
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