UK Property Market Outlook: Will the housing market crash in 2021?

Covid-19 changed the world as we know it. Economies started to suffer, industries all around the globe were impacted, and countries went into lockdowns. Businesses shut down, and employees faced salary cuts, while people around the world lost their jobs. The pandemic took a toll on every industry, from the hospitality industry to the aviation industry and the real estate industry.

During the first lockdown in the UK, the real estate industry came to a complete standstill. Buyers and sellers who were in the middle of making a deal had to put a temporary pause on their sale and purchase, real estate agents could not work during the lockdown, and even real estate inspectors and property evaluators were forced to shut shop. During the first lockdown, it seemed that the UK real estate industry was heading for trouble. As soon as the first lockdown lifter, the UK government allowed real estate operations and even introduced the stamp duty holiday scheme. The stamp duty holiday scheme was the temporary suspension of stamp duty on properties under £500,000 and reduced the stamp duty prices for properties over £500,000. While this scheme gave the real estate industry a much-needed boost, the industry’s future remained uncertain. This brings us to the question on everyone’s minds – will the  UK housing market crash in 2021? This is what the estate agents in Beckenham have to say.

The Lack of Low Deposit Mortgages and Rising Unemployment

For first time buyers, it is getting tough to fulfil the dream of becoming a homeowner. The loss of employment, the reduction in salaries and the uncertain job market have certainly taken their toll on first-time buyers. Also, it is becoming increasingly difficult for first-time buyers to get low deposit mortgages. Earlier, low deposit mortgages were quite common among top lenders. However, after the Covid-19 pandemic, lenders have become very strict about their lending criteria. There has been a significant reduction in the number of low deposit mortgages available in the market. However, the government announced a mortgage guarantee scheme that is to be launched in April 2021. Under this scheme, buyers will be able to purchase a property by paying just a 5 per cent deposit. This scheme is supposed to last till the end of 2022, which means that buyers will have enough time to apply for this 5 per cent deposit mortgage. If this scheme does go forward as planned,  the Streatham estate agents are certain the UK housing market will recover sooner than later.

Interest Rates and House Price to Earnings Ratio

There are two things that can cause a crash in the market. One is the increasing interest rates on mortgage payments, and the second is the house price to earnings ratio, which is the ratio of housing costs and living costs. As the interest rates continue to rise, it becomes more and more difficult for homeowners to pay off the mortgage, which reduces the affordability of the home. As for the house price to earnings ratio, as the price of owning the home continues to surpass the cost of living, the affordability of the house is affected, which in turn affects the housing market. If the interest rates and house price to earnings ratio rise steadily, as they did in 2007 right before the 2008 crash, the UK’s housing market could crash.

Predictions Made by The Experts

Various experts had very different predictions about the UK housing market. Some believed that the property market would crash in 2021, while others thought that we would see a steady rise in prices. Some experts said that the property market would hit rock bottom and slowly start to recover. Rightmove predicted that the cost of houses would rise by 4 per cent in the year 2021. According to Rightmove, the stamp duty holiday extension will help boost the housing market, while its suspension could just cause a temporary lull in real estate transactions. On the other hand, Halifax predicts that property prices in the UK will fall by 2 per cent to 5 per cent in the year 2021. The Centre for Economics and Business Research has predicted that property prices will fall by a whopping 5 per cent in 2021. Experts at Zoopla have indicated that the annual house price growth will just slow down by 1 per cent, probably at the end of 2021. Be it experts at The Centre for Economics or the Business Research,no one can predict with any certainty what the future of the UK housing market holds. While most experts feel that we will see a decline in the average price of houses, it seems unlikely that the UK housing market will ‘crash’ in 2021.