Why have House Prices fallen in 2021
The mini boom of last year seems to be over as records show that house prices have fell for a three consecutive months followed by a small increase in February. Different to the previous lockdown of 2020 the property market is open for business, normal social distancing rules apply and viewings from prospective property buyers can still commence. In addition surveyors are still able to carry out their normal duties and if any remedial work is required builders and workman are still be allowed to visit your home. At Direct House Buyer you’ll be pleased to know that our we buy any house service will also continue as normal during this 2021 lockdown and we are not experiencing delays. Information on moving house and conducting property viewings can be found here.
What has Happened to House Prices in Recent Times
Data taken form the Rightmove house price index shows:
- February 2021 – £318,580
- January 2021 – £317,058
- December 2020 – £319,945
- November 2020 – £322.025
- October 2020 – £323,530 (Record High)
As can be seen from the date above, last year the average house price reached a record high of £323,530 as reported for October. This is an Average price fall of £4950, that’s around 2%. To put this price reduction in perspective it is not much of a fall seeing that house prices fell around 18% during the recession of 2008.
Why did Prices not Fall in the First Lockdown
During the first wave of coronavirus the property market was forced shut and it effectively froze property prices in a stagnate moment of time. It turns out that this benefited and protected house prices from any form of panic selling. By the time the property market was re-opened and buyers and sellers were able to start negotiating the government had introduced schemes that protected jobs, protected people from defaulting on loans and their mortgages, provided furlough income and notably a stamp duty scheme was announced that unexpectedly created a mini boom, with people rushing to take advantage of the tax saving.
Why are Prices Falling Now
Different to the last national lockdown, the property market is now open to negotiations between buyers and sellers. Rather than the market being shut with zero transactions going through effectively freezing property prices. The push and pull between sellers is allowed to take its naturally course and after a mini boom there is no surprise that there is a natural correction particularly as there is so much uncertainty in the air.
What will Happen to House Prices when Furlough Schemes End
Employees are still receiving furlough and it is expected that a fourth SEISS grant will be announced in the budget on March 3rd. Inevitably, at some point the governments income support will come to an end. It was recently announced that the economy contracted 9.9% the largest annual fall in hundreds of years. It is also apparent that when the National Lockdown is lifted and furlough is no longer provided then many people may have no job to go back to. With no income to pay their mortgage and lenders being allowed to repossess homes as may happen after April 1st, home owners may be forced to sell their house quickly and lower their asking price so that they can free themselves from financial obligations that they can no longer afford.
Stamp Duty Relief ends 31st March
It has been widely discussed that the 2020 mini boom was largely due to buyers scrambling to take advantage of the Stamp Duty relief. This is no longer possible, Right move have reported that it typically takes four months to complete a hose sale and with the Stamp Duty relief coming to an end on the 31st March it will be unrealistic to complete in time to receive the benefit. The endof the Stamp Duty tax relief could be seen as the first removal of fiscal measures that have helped prop up the property market during these uncertain times.
First Time Buyers will receive Help to Buy on New Build Houses Only
During April the government will launch a new Help to Buy scheme which many would think is fantastic for the property market. However, there is one factor which could be detrimental for those who are wishing to sell their house. The latest Help to Buy scheme only applies to new build homes, meaning those who are wishing to sell their existing home will be left out the picture. Prospective first time home buyers will now have their interest diverted towards buying a new build home, meaning there will be less buyers available. We may see sellers having to reduce their asking prices to make their house more attractive and fall more within the first time buyer price bracket.
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