UK house prices to fall up to 5% in 2021, says Halifax

UK house prices are set to fall between 2% and 5% next year, dented by rising unemployment and the end of the stamp duty holiday, Halifax said on Tuesday.

Source: Sharecast

In its 2021 outlook, the mortgage lender said that while the property market proved surprisingly robust in 2020 despite the impact of the Covid-19 pandemic, prospects for next year look weaker.

The average house price now stands at £253,243, up from £235,353 a year ago, with annual house price growth at 7.6% - the strongest since June 2016.

Halifax managing director Russell Galley said: "Despite the deepest recession for centuries, house prices have risen over the past year at their fastest rate since 2016, with mortgage approvals also at their highest level for over a decade. This growth has been driven by a shift in demand from buyers as a result of increased home working and a desire for more space, whilst the stamp-duty holiday brought forward many transactions that might otherwise have been planned for next year."

Galley said that while the economy should begin to recover in 2021, helped by the roll-out of vaccines, the jobs market will inevitably adjust to the changes in demand that are occurring, and unemployment is expected to rise.

"With the stamp duty holiday also due to expire in March - and lower levels of demand - housing market activity is likely to slow. Taking all of this into account, the post-summer surge in house prices is unlikely to be sustained. Prices are expected to fall by between 2% and 5% next year, although forecast uncertainty is much higher than usual given the current economic and political environment."

A fall of up to 5% would only partially reverse the 7.6% rise in prices seen over the last year.

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