As with most things covid related, gloom filled predictions are always round the corner. Be it health, social unrest or the economy many have forecasted 2021 to be the year of a second crash in the housing market, and considering many landlords and professionals will be asking questions for the upcoming year, we thought we’d devote an entire blog to this one issue. So how will Leicester’s local housing economy behave in 2021? What’s the forecast for interest rates, demand and supply and new legislation?
So, let’s get the ball rolling on a positive one. Despite surging unemployment, rising national debt and the restriction lockdown has put on everyone to go out and shop, Leicester’s housing market remains undeterred! People are still looking to move, still looking to improve their own situation and environment with more outdoor space and a place to work from home and most of all take advantage of the thousands of pounds to be saved from the Stamp Duty tax break. We know that across the country house prices are rising. Even taking in to consideration the 3 month lag, the average house price according to the Land Registry, is 4.7% higher as of the end of September than the same time in the previous year, rising to 7.8% in Leicester alone.
It goes without saying that house prices will start to even out in 2021 when the current Stamp Duty holiday comes to an end, but what’s really encouraging to take note of is how many mortgage approvals were granted this year compared to last and how that compares with previous years. As many of you know, mortgage approval data is more up to date than house sale data due to the fact house sales are only categorised as such on completion. This means the Land Registry is always operating on a 3 month lag. Not so with mortgage approvals.
Last month according to the Bank of England, 97,500 mortgage approvals were approved compared to the long term average of 65,400. This monthly average rise beats pre-market crash figures in 2007 and its a whole third higher than those seen in the ‘Boris Bounce.’ One thing to be mindful of is the effect the backlog of mortgage approvals will have on those in selling chains to get the move finalised and acted upon before the March deadline when the Stamp Duty holiday comes to an end. It only takes one link to break for the entire chain to fail, which is why every member of a chain has a responsibility to every other member to make sure they have up to date information and make quick, effective decisions when problems arise.
Two other key factors in the overall health of Leicester’s property market will be lower interest rates than in times past, and the fact people now generally owe less of the overall % of their home. Combined with other factors like fixed rate mortgages and in turn you have less negative equity overall. So, next year should see a stable property market throughout as many investors in Leicester will hold off selling property towards the latter end of 2021 until they start to see greater levels of activity. We can also expect to see changes to the Capital Gains market legislation in 2021 that should present better investment opportunities to sellers all round.
It’s encouraging to note that the global pandemic so far, hasn’t effected low interest rates, the rise in housing demand from net migration (since 2009) or the average life expectancy rising by 2.1 years since 2008. All of these factors contribute to a healthy and stable market, which looks set to continue in to 2021. If there’s anything that you’d like to know about how we operate as a business and what we do to keep your investment healthy, feel free to give us a call on 0116 270 6699 and we’d be really happy to talk!
