What now for property prices in Horsham and Southwater?
Paul Davies, director of the Southwater and Horsham Estate Agent At Home Estate and Lettings Agency gives Southwater News an exclusive expectation for the local property market in 2021.
2020 surprised us all with property prices ending the year mostly in positive territory. Zoopla figures showed that November 2020 saw the highest average annual increase of 3.9%. Given the pandemic, what’s behind the price increases, have all properties increased in value and what does 2021 hold?
Have all properties increased in value recently?
The short answer is no. Detached homes beat the average increase, rising by 6.7% in the year to November 2020 (BBC report, 18/11/2020) and this was driven by buyers needing more space, with working from home becoming a more permanent feature. It was also due to the trend for flight from the city buying to ‘down-price’ (or to get more home for your money) as paying a premium for a shorter commute becomes less necessary in the ‘new normal’. We certainly saw more local demand from London and Surrey commuter belt buyers in the second half of 2020.
An improving picture for first time buyers
Not all properties benefitted though. Access to credit was constrained for those with less than a 15% deposit. This disproportionately affected first time buyers, as did the economic fallout from COVID with this generation more likely to see job losses. First time buyers disproportionately purchased leasehold property and this is where we saw local price drops through reduced demand, so it really was a tale of two markets in 2020. However, more lenders are now offering up to 10% deposits and this could make it a good time for first time buyers and landlords to make purchases as prices are low.
The stamp duty holiday
The obvious support mechanism for house prices was the stamp duty holiday, so will reversing this on 01 April 2021 harm prices? The optimist in me feels that the Government will extend the stamp duty holiday, or at least water down the normalising of rates. The Government clearly needs more taxes, but this holiday has led to a surge in sales and supported many jobs in the direct and indirect property industry, adding to the coffers via corporation tax, national insurances and income taxes. It’s not just estate agents, solicitors, mortgage advisers and surveyors who benefited. Think of the countless trades, removals, DIY and furniture expenditure associated with moving. Eliminating the stamp duty holiday may be negative to the overall tax take with less transactions, associated employment and money spent.
A persuasive argument for extending the holiday
The behavioural aspect also needs to be considered. Any government needs to remain popular and no matter what side of the political spectrum you lie, it’s hard to argue that the current incumbents are without criticism at the moment (albeit under trying circumstances). The stamp duty holiday was one area of successful policy, but sentiment could turn against the Government if many miss out because of solicitor and lender induced delays (both professions have had to adapt to new working environments in conjunction with unexpected levels of demand). All of which means, I’d be surprised if we don’t see something supportive in regard to the stamp duty holiday cliff-edge, which would in turn continue to support prices.
Learning from past mistakes
The financial crash of 2008/09 saw money printing, but this ended up with banks. This time round, the printed money is ending up in back pockets and with businesses. Expenses have crashed with us unable to holiday, eat out, entertain, commute or shop. Interest rates have dropped and this excess and spare cash needs to find a proverbial home. This may also become a longer-term trend as people see the value of investing in their homes rather than commuting and spending, all supportive of house prices.
A much-needed boost
2020 also saw Government borrowing and debt shoot up to 99.5% of gross domestic product, a level not seen since the early 1960’s. When currencies are debased like this, assets can perform favourably, not so much by way of rising house prices but by way of the value of the currency used dropping.
What’s more, in dealing with this debt, the government has 3 options; reduce expenditure (unpopular), raise taxes (unpopular) or attempt to inflate the debt away which would further debase the currency and be supportive of notionally rising house prices.
Cause for optimism
So, I remain quietly optimistic. Just as 2020 took the industry by surprise, I feel the ingredients are there to continue house price growth in 2021, albeit potentially at a lower pace. Please get in touch if you’d like to know more about house price predictions in your area.