2020 was perhaps the most volatile year for the UK’s property industry, thanks to the pandemic and its effects on the economy. But what will happen to property prices in Oxfordshire in 2021? Will we see growth in both the sales and lettings sectors? We ask our market experts to find out…
Despite everything that’s happened in 2020, the housing and rental market stayed unusually buoyant. There was a surge in demand over the summer due to the Government’s announcement to pause Stamp Duty payments, and house prices in the UK experienced their highest monthly rise in 16 years.
Brexit negotiations have been finalised, however market experts are predicting there to be just as much change in the property sector in 2021 with the Stamp Duty holiday set to end in March, and another national lockdown underway. In order to understand what could happen in the property market over the coming year, the directors at scottfraser have laid out their predictions for sales, lettings and the buy-to-let market in 2021.
Will house prices change in 2021?
Demand in the UK housing market is currently at an all-time high, and during the summer peak properties were selling for their asking price, or in some cases, more. According to Land Registry data, as of September 2020 the average house price in the UK was £244,513 (£371,863 in Oxfordshire). Overall, prices rose by 1.7% from August to September, and the increase is 4.7% up from 2019.
With the Brexit deal agreed, and vaccine delivery in progress, 2021 is looking positive for housing, despite a third nationwide lockdown at the start of this year.
We predict house prices may soften slightly, but will stay resilient and stable in 2021, particularly for three- and four-bedroom houses. For example, detached properties in Oxfordshire have risen in price by nearly £28,000 on average year-on-year, while detached properties in the South East overall have risen by over £34,000 on average.
Some big cities and town centres, however, may see a fall of around three-four percent, particularly for flats, where there is an oversupply in town and city centres, with more developments already in progress.
We expect to see a steady increase of one-two percent in 2021 for rents – these are easier to track as they can’t outpace wage growth. However, similar to house prices mentioned above, this is likely to be lower in bigger cities, where we are seeing less demand, and be higher in suburbs or on city outskirts.
Is the Stamp Duty holiday likely to be extended?
The house sales pipeline grew considerably since the introduction of the Stamp Duty holiday in 2020. We’ve already seen calls to extend the deadline from the property sector. With pandemic restrictions now continuing into the new year, this sort of announcement would be an essential boost for property sales and the wider economy.
It’s unlikely to be extended indefinitely, but we hope the Chancellor will announce in March that the holiday will be extended until the end of 2021. This will allow for house sales that didn’t get through in time to still take advantage of the reduction in Duty, as well as keep the housing market buoyant.
Swapping the city for the suburbs
Having to spend more time at home during 2020 led to many of us seeking more space. Whether that’s moving to properties with gardens or separate areas to enable easier remote working or space to home-school children. With the commute to big cities still not having fully returned, and another lockdown underway, we are likely to see a continued ‘relocate to the suburbs’ in 2021, in order to upsize to properties meeting these criteria.
Conversely, we are already seeing reduced demand for flats in city centre, while we expect the desire for properties, both to buy and rent, in suburbs to continue to grow.
Rightmove reported Lightwater in Surrey had the highest uplift in buyer searches in 2020, and that fits the pattern we’re expecting to see across the country into 2021, especially in Oxfordshire. Both house buyers and renters will increasingly seek homes in areas that are commutable to big cities, with good transport links, facilities and lots of green space.
Embracing the let-to-let-market
Many homeowners will become both landlord and tenant next year in order to obtain a bigger property and more green space, following the upsizing trend. According to Rightmove, home movers are having to pay almost £68,000 on average to move from a two-bed flat to a three-bed house – £4,000 more than in 2019. With the cost of trade-up moves rising and mortgage lending currently extremely competitive, we predict that homeowners will choose to let out their existing property and rent a bigger house in order to quickly get more space within their budget.
The let-to-let option will be increasingly used by homeowners next year, particular among those in leasehold flats, or for those with properties seeing less demand who are finding it difficult to trade-up.
Will the Brexit transition affect the UK housing market?
With a Brexit deal now in place, there is more certainty for the housing market. The deal is unlikely to have much of an impact on the sector in the short term, as the desire for lifestyle changes will be more likely to influence demand. House prices could however, be impacted by the country’s economic recovery from COVID-19 and job uncertainty. If the Brexit deal causes wider job losses in the longer term, this could affect the house prices, but in the short term, we will likely continue to see stability.
Technology is transforming the way we move home
Virtual Viewings saw a huge uplift during the pandemic, and the directors at scottfraser predict these will still stay a strong part of the sales and lettings process into this year.
While we don’t expect virtual tours to take over the viewing process completely (buyers and tenants jumped back pretty quickly to wanting physical viewings of a property when the lockdown restrictions were eased), the convenience and simplicity of video tours will continue to help those unable to see a house physically, and reduce the time spent on wasteful viewings – for both buyers and sellers, as well as landlords and tenants.
Open Banking will transform tenant management
We expect to see more agencies embrace Open Banking and online customer accounts for maintenance to speed up tenant reference checks, payments and maintenance resolutions in the lettings sector.
This technology allows our agents to scan a prospective tenant’s bank account transactions, if they grant permission, and determine their rent payment history straight away. This enables landlords and agents to turn around affordability checks in minutes, instead of days, and provide better lettings management throughout tenancies.
What you need to know about buy-to-let investments in 2021
With so many companies now working from home, many are downsizing their office space. This uncertainty in the commercial sector will lead many landlords and investors to diversify their portfolio and invest in more residential property developments in order to minimise risk.
Similarly, in direct-to-residential lettings, we’ll likely see landlords diversifying from one- and two-bed flats into three- or four-bedroom houses to secure their investments, matching the demand for larger properties.
With interest rates low and the stock market volatile, property is still one of the few places that people can secure investment in for the longer term, so the buy-to-let market will continue to be buoyant.
Online estate agencies will dip in popularity
In a constantly-changing market, vendors will want knowledge and expertise about Oxfordshire from their estate and letting agencies to help them through. We predict a shift away from online-only agencies towards those with a high street presence. Online agencies currently account for only around 8% of all transactions, but this might slip again if the market gets more challenging later in the year than the boom in demand that we saw in summer 2020.
Another year of change on the way
Following the previous year of rapid change to the housing market, the property industry has had to adapt quickly. That preparation has put the industry on a good path for 2021. Despite fluctuations in the economy, experts at scottfraser believe the housing and rental markets will stay resilient next year – especially following support from additional Government measures, such as the extended Furlough scheme and the potential extension of the Stamp Duty holiday.
The pandemic has changed how we all think about our homes and where we live, possibly forever. At scottfraser we are here and ready to support our customers through these changes in 2021.
Want to talk to us about your property? Whether you’re looking to sell or let, start your property journey with a free, no obligation property valuation.