LONDON (Reuters) – British house prices will flatline this year as a property sales tax cut is due to expire and unemployment is expected to rise, according to property market analysts polled by Reuters who said activity would be driven by a desire for more living space.
Like much of the world, Britons have endured months of tough lockdown restrictions to try to stop the coronavirus from spreading and having been cooped up indoors, with many working from home. Some of those who can afford to now wish to move.
“Living in a flat in central London with no outdoor space has been very difficult since the first lockdown began; sharing a small dining room table to work on for 11 months is far from ideal,” said Jonathan Penny, who works in the capital for the charity Help Musicians.
“The pandemic has proven, however, that working part-time from home is possible and has given us the confidence to relocate to the coast to give us a better work/life balance.”
For a graphic on Reuters Poll: UK and London house prices outlook –
When asked in the Jan. 13-28 poll what would be the biggest driver of housing market activity this year six said a want for more space. Five said a successful coronavirus vaccine rollout.
Other reasons given included fiscal stimulus, easy monetary policy and an economic recovery.
Britain has already vaccinated over 9 million of its citizens and when asked whether a resurgence in COVID-19 would derail housing activity this year 12 said it was a low or very low risk. Six said it was high and none said very high.
“We are at the beginning of the end of COVID-19,” said Russell Quirk at estate agency Keller Williams.
“Shots in arms and a government that will very soon have to focus on economic recovery as their absolute priority as hospitals empty, provides a significant risk mitigator to the virus being a further obstacle in mid- to late-2021.”
After contracting sharply last year the UK economy was expected to grow 4.9% this year and 5.3% next year, a separate Reuters poll found. [ECILT/GB]
But house prices, the bedrock of consumer wealth in Britain, will on average end this year where they started it, according to the latest poll of 26 market specialists, unchanged from a September prediction. Next year they will rise 2.7%.
“The negative economic impacts of COVID-19 have bypassed the housing market so far due to the extraordinary support measures put in place by the government, regulators, and banks,” said Andrew Wishart at Capital Economics.
“But while policy has probably reduced and delayed the impact of COVID-19 on house prices, it has not removed it altogether and the pandemic will take its toll this year as policy support is removed.”
Home prices in London, long the hotbed for foreign investors, were also expected to flatline this year before rising a more modest 2.0% in 2022.
“Changing commuter patterns as a result of the pandemic and foreign buyer dynamics make the market less bouyant,” said Miles Shipside at property website Rightmove.
Despite ultra-low interest rates, when asked to describe the level of national house prices on a scale of 1 to 10 from extremely cheap to extremely expensive, the median response was 7, up from 6 given in September, and in the capital it was an unchanged 8.
“House prices in the capital are growing far faster than wages, from an already high base, putting buying a home out of reach for many,” said Jamie Durham at PwC.
“The stamp duty (property sales tax) holiday, a shift in preferences towards larger properties, and pent up demand are driving activity across the country, which is in turn leading to price growth in the market.”
(For other stories from the Reuters quarterly housing market polls:)
(Reporting by Jonathan Cable; polling by Tushar Goenka and Richa Rebello; Editing by Toby Chopra)