Property prices across the country are set to continue falling over the next couple of years despite Chancellor Rishi Sunak’s stamp duty cut, new research suggests.
The Centre for Economics and Business Research has predicted that house prices will fall by 5 per cent this year and a further 10.6 per cent in 2021. The CEBR said it does not expect house prices to return to pre-pandemic levels until ‘at least’ 2023.
The downbeat housing market prediction will put prospective buyers buoyed by the min-Budget stamp duty cut in a quandary over whether to take the plunge in the market now or wait for prices to come down.
Forecast: The Centre for Economics and Business Research thinks house prices look set to fall by an average of 5% this year
On Wednesday, the Chancellor announced that buyers will, until 31 March next year, no longer have to pay any stamp duty on the first £500,000 of a home’s purchase price.
Before then, the threshold where stamp duty started stood at £125,000 in England and Northern Ireland, or £300,000 for first-time buyers if they were buyinga home worth less than £500,000.
The tax holiday will save buyers as much as £15,000, which will boost deposits – and therefore affordability – or go towards home-improvement funds.
The CEBR thinks the steepest drop in house prices will emerge in the final quarter of this year, once the Government’s Job Retention Scheme comes to and end and mortgage payment holidays are curbed. Thousands of jobs have already been lost in the last few months, and many more are expected.
Property prices are expected to rise again in the third quarter of 2021, but ‘a V-shaped recovery in the housing market is not expected’, the Cebr said.
Predictions: House price predictions from the Rics published today
Sales: Property sale transaction fluctuations in the UK since 2000, according to the Rics
The think-tank believes the stamp duty holiday will shave off around £4,400 from the average property sale, prompting a 6 per cent increase in transactions, equating to an extra 41,000 additional sales between now and 31 March. Around 60,000 property sales could also be brought forward from later in the year.
‘Rising transaction volumes will inject some much-needed life into the housing market in the coming months’, the Cebr said.
The scale of the recession facing Britain has become stark in the last few months, with the Bank of England previously predicting house prices could plummet by 16 per cent this year.
Other predictions, are forecasting a more modest price drop. Estate agency Knight Frank thinks house prices could fall by 7 per cent this year, while the EY Item Club is forecasting a 3 per cent drop over the next few months, before stability resumes at the turn of the year.
With mortgage repayment holidays ending in September and the Job Retention Scheme due to close for good in October, the CEBR said it expects the ‘full force’ of the downturn’ to be felt by a large number of households towards the latter stages of the year.
The think-tank does not believe the Chancellor’s job protection measures announced on Wednesday will be sufficient to prevent ‘many’ other companies from axing staff in a bid to cut costs.
Housing secretary Robert Jenrick gave the housing market and housebuilders the green light to get back into motion again from 13 May across England.
Since then, there have been some signs that the market is, tentatively coming back to life , a closely-watched survey from the Royal Institution of Chartered Surveyors suggests.
Findings from the Rics published today reveal that there were signs of a ‘recovery’ across the housing market last month. The survey’s gauge of newly agreed sales moved into positive territory for the first time since February, with a net balance of +43 per cent of respondents citing an increase in transactions in June.
Buyer demand, new listings and completed sales levels all rose in June, the Rics said. But, experts working in the sector remain ‘relatively cautious’ about whether this spike in activity will continue.
‘Respondents now anticipate a flat to marginally negative trend in national house price inflation over the next twelve months as a whole’, the Rics said.
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