House prices to dip 6% in Q1 helping first-time buyers
The property services firm estimates the average house price will fall from £352,106 in December 2020 to £330,295 by March – taking values back to roughly October’s £328,000 average according to the Land Registry data.
Reallymoving expects the decline to accelerate month-on-month and is predicting a 1.2% fall in January, a 2.5% drop in February and a further 2.6% dip in March.
It also warned the market could see the return of gazundering, where buyers reduce their offer just prior to exchange, as pressure around the stamp duty holiday deadline mounts.
Eleven out of twelve UK regions are set to see average house prices fall over the first quarter with Wales the only area to see further price rises.
Reallymoving said this could be due to strong demand for extra space, rural lifestyles and second homes post-lockdown.
However, it noted the correction seen across the UK may simply be delayed in Wales as price gains of 2.7% in January and 2.8% in February will be partly negated by a 2.7% fall in March.
The most significant Q1 falls will be in the West Midlands, North East and South West with drops of 12.2%, 11.4% and 10.6% respectively.
Return of first-timers
It suggested first-time buyers maybe attracted later in the spring as prices ease off, particularly if lenders continue to warm towards higher loan to value loans and ease restrictions around gifted deposits.
And the culmination of the stamp duty holiday will also reduce pressure on conveyancers, surveyors and removals firms bringing more reliability to the home move process.
Reallymoving CEO Rob Houghton noted it was never a matter of if the price rises would end, but when.
“In the second half of 2020 buyers faced stiff competition for homes, forcing them to pay more and in many cases wiping out the stamp duty saving, but already this year we’re seeing demand falling to more normal levels and prices heading back down again,” he said.
“The extent of the decline depends on the length of the current lockdown and the chancellor’s generosity in mitigating its impact, the speed of the vaccine roll out and the subsequent economic recovery.
“The market is yet to be truly tested by the end of the furlough scheme and mortgage payment holidays, both of which are currently masking job losses and distressed property sales.”
He concluded that there was some positivity: “Combined with declining prices and the end of the stamp duty holiday, we could see favourable conditions for first-time buyers to make a return to the market later this year.”