You are here: Home - Mortgages - Buy To Let - News -

House price growth will be ‘weak or negative in 2021’

Written by: Shekina Tuahene
Average house prices will either see a minimal increase or fall over the next year, PricewaterhouseCoopers (PwC) has suggested in its economic update.

The firm predicted two scenarios which could impact the housing market, a contained spread of Covid-19 and a further widespread outbreak. 

It suggested in the event of a contained spread with local and shorter lockdowns, there would be a limited effect on the economy resulting in mortgage lending returning close to pre-Covid levels and low interest rates. 

If there is another outbreak and further lockdowns, PwC predicts there will be higher levels of unemployment, more lender caution and a low interest rate environment. 

In the contained spread scenario, PwC forecast annual house prices would increase 1% in 2021 to an average of £239,000. Over a five-year period, it suggested house prices will grow 4% to £280,000 by 2025. 

However, if there is a further serious outbreak, it predicts that house prices will fall by 7% next year to £218,000 and over a five-year period, only rise 3% to £245,000. 

In either scenario Brexit is expected to effect house prices, the firm added. 

The report said: “House prices over the coming years may also be impacted by the UK moving into the next phase of its relationship with the EU and the rest of the world.  

“Due to the number of permutations to our scenarios that this structural change could introduce, we assume that an agreement is struck by the end of the year between the UK and the EU in both scenarios, and the transition is smooth.

“If this is not the case, the short- and medium-term impact to UK house prices could be considerable, particularly for some regions of the UK.” 

Fifth of people less likely to purchase 

PwC also conducted a housing survey with 1,000 respondents and found 20% were less likely to buy a home within the next 24 months than they were before the pandemic. 

The state of the job market as well as personal employment security were cited as main factors for the shift, as was a fear around the loss of income and uncertainty towards house prices in the medium term. 

The stamp duty holiday has possibly influenced the decision to buy a house for others, as 10% of respondents said they were more likely to purchase than they were pre-Covid.  

The survey was carried out before the government revealed its plans for further employment support last month. 

Age differences 

Compared to other age groups, the split between those more likely to buy a house and those less likely was the closest among those aged 25-34.

As they tend to be the group with smaller deposits and less secure employment, 29% said they were not as likely to purchase compared to the start of the year. 

On the other hand, 25-34-year olds in more stable jobs have been able to save while reducing their expenditure, and now 21%  say they are more likely to buy a home. 

For people aged 35-44, 13% are more likely to purchase compared to 26% who are less likely. 

People over the age of 45 are happy to stay put as just 2% of over 65s are likely to purchase, compared to 5% of those aged 55-64 and 9% of those aged 45-54. 

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

Flight cancelled or delayed? Your rights explained

With no sign of the problems in UK aviation easing over the peak summer period, many will worry whether holida...

Rail strikes: Your travel and refund rights

Thousands of railway workers will strike across three days this week, grinding much of the transport system to...

How your monthly bills could rise as the base rate reaches 1.25%

The Bank of England has raised the base rate to 1.25% as predicted – the fifth consecutive rise in just six ...

What will happen if rates change

How your finances will be impacted by a rise in interest rates.

Regular Savings Calculator

Small regular contributions can build up nicely over time.

Online Savings Calculator

Work out how your online savings can build over time.

DIY investors: 10 common mistakes to avoid

For those without the help and experience of an adviser, here are 10 common DIY investor mistakes to avoid.

Mortgage down-valuations: Tips to avoid pulling out of a house sale

Down-valuations are on the rise. So, what does it mean for home buyers, and what can you do?

Five tips for surviving a bear market mauling

The S&P 500 has slipped into bear market territory and for UK investors, the FTSE 250 is also on the edge. Her...

Money Tips of the Week