No one could have predicted it. Not estate agents, not economists, and especially not the country’s home builders. But COVID-19 flipped the property market upside down, igniting a housing boom and an emotional run on housing like no other.
The pandemic also hit mortgage companies and financial institutions hard. According to Black Knight, a mortgage data and technology company, 5.2% of mortgages were in forbearance as of January 2021. That represents around $547 billion in unpaid principal.
Despite a dreary ending of the year 2020, things are looking quite promising for 2021. Experts predict a post-pandemic rebound, which will likely be marked by job recoveries, steady mortgage rates, and the laws of demand and supply all working together to make home sales explode. Here’s an outlook for the property market in 2021.
1. Home Prices Will Skyrocket
Despite the UK starting the year with a third nationwide lockdown, 2021 is looking positive for the home sellers. Savills has predicted that the UK house prices will grow from 0% to 4%.
Many economists are predicting the UK property market will remain strong throughout the first half of the year.
In the US, the housing market trends in the first quarter of 2021 show that home buyers will be in for a competitive spring as supply remains low. The increasing demand will cause buyers to bid higher for the available properties, further skyrocketing the home prices.
2. Low Inventory
If you’re hoping to buy a home in London, Leicester, Bristol, Birmingham, Liverpool, or Manchester, expect to pay a premium price.
The low inventory count in these regions coupled with high demand is pushing the prices higher day in day out.
Despite the high demand and low inventory, homes are staying longer in the market. The estate agent comparison site, GetAgent.co.uk, has revealed that it’s now taking 43 days longer to sell a home due to the delays caused by the stamp duty holiday.
However, sellers who want a quick property sale can leverage the services of a reputable property buying company and get cash in the bank in just a few days.
The low inventory problem is also witnessed in all the major US cities. The US housing inventory currently sits at a record low of 1.03 million units. However, unlike in the UK, properties in the US are selling faster than ever—in less than 20 days.
3. Low-Interest Rates
In March 2020, the Bank of England made two emergency interest rate cuts in an effort to reduce the economic impacts of the COVID-19 pandemic. It slashed interest rates from 0.75% to 0.25%, then whipped it down to 0.1%–a historic record low.
It’s unlikely that the interest rates will rise anytime soon, given that the UK kicked off the year with a third lockdown, and the economy is not expected to reopen fully until June 2021.
In the US, mortgage rates are also expected to remain low. Lawrence Yun, the chief economist at NAR, predicts that the 30-year fixed mortgage rates will remain stable or increase slightly from the 50-year low of 2.71% in 2021.
4. Demand for Homes Will Grow
The COVID-19 pandemic crumbled many industries and even put the real estate market on hold for a while.
However, the property market bounced back quickly and has been booming since then. For instance, in the UK, the number of weekly house sales skyrocketed in April 2021, reaching the highest level ever, at 23% sales, according to Rightmove data.
Despite the increase in house prices, the demand for houses in Britain continues to grow, and the upward trend is expected to continue throughout the year.
The US will also experience an increase in house demand. Danielle Hale, the chief economist at Realtor.com, expects US home sales to grow 7% in 2021. According to Danielle, this growth will be fueled by the low mortgage rates, strong demand, and a recovering economy.
What are your thoughts on the property market projections highlighted above? Share with us in the comments section below.