Housing Outlook for 2021

What is the outlook for housing for 2021?

Outlook for Housing in 2021

Back on August 19th, I wrote a piece here about the impact of “Covid19” on the private rented sector and housing in general.

Even earlier, on March 18th, I wrote another piece too. I stand by both articles, which have stood the test of time well. They are linked to at the end of this article.

So where are we now?

House prices have stayed up reasonably well around the UK – and much better than I thought they would in those articles in March and August. But I put this down almost entirely to the impact of the Stamp Duty Holiday, which is pretty well drawing to a close now.

I say it is “drawing to a close” because the delays with processing applications at the perennially crap conveyancers and mortgage companies, mean that if you don’t have an offer accepted already – the chances of completing your transaction and house move by the end of the Stamp Duty Holiday is almost zero, though if you are a cash buyer and your conveyancer is very good, you might just squeeze in. (Perhaps, like me, you are sick and tired of big companies like mortgage companies still hiding behind the ever ready “because of Covid” excuse. It is getting tiresome).

But I can still only see house prices taking a fall in 2021 – I predict by 8% by the end of 2021 compared to where they were in Jan 2020.

The tax burden that will be placed on people to make up for the catastrophic UK handling of this virus – and resulting increased government debt – will make sure of that.

Brexit will not help matters either in the short term, though Boris Johnson has made a decent fist of the trade negotiations – much better than he has done of handling the virus. Longer term, I still think there is the potential for Britain to prosper more than if it had stayed in the EU.

I had thought the EU would happily hurt themselves if it meant that the UK can be punished sufficiently to stop other countries in the Bloc from thinking they could leave to. That does not appear to have happened, with the more pragmatic Germans, Dutch and Swedes winning over the “punish them” French. A surprise on the up-side.

Not all houses and areas will be impacted in the same way.

I expect prices of inner city flats to be hardest hit. Lots of short term lets have gone over to long term lets in the cities and bigger towns, thus increasing the supply of long term lets – and student demand is still much weaker than normal and may stay that way for some time yet. This will reduce rents and ultimately house prices too.

Houses and flats with some office space and a garden in outer suburbs and small towns may be able to hold their values – as demand for them could hold up quite well. But it depends on what the local economy is like. Towns like Crawley, close to Gatwick Airport, for example, will be hit hard. It already is.

If you are invested – hold on. Keep picking good tenants.

In my own business we have had no voids (periods when our properties are empty) and all tenants are paid up – the same goes for the tenants of most of my clients. Get both our books to see how to do this yourself or how to make sure your agent is doing it right for you.

Opportunites

And look for opportunities to buy from distressed sellers as 2021 progresses. There will be really good deals out there. Mortgage finance is a bit squeezed right now, lenders are wary and charging much higher interest rates at 75% LTV than at 60%. Cash will be king, as ever in getting cheeky offers accepted.

Rents will hold up better nationally – maybe a fall of 5% by the end of 2021 compared to Jan 2020, but outer suburban small houses in the right areas could even see rents increase slightly as more office folk need to be less close to the city centre less than they did before, when they were commuting every day.

Things could turn around quite sharply later in 2021 and into 2022. Once things turn round, the bargains will disappear as fast as snow under a warming sun.

Happy New Year.

NOTES:

Article from August 19th 2020:

consequences of cv19 and the coronapanic for the Private rented sector – Letting Focus

Article from March 18th 2020:

Coronavirus and private landlords – Letting Focus

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