House price growth to stall in 2021

House price growth is set to stall next year after rising 2% this year, according to the latest forecast from estate agent Hamptons.

The firm said the full impact of the covid outbreak will be felt next year on the housing market, offsetting the growth in demand since the re-opening of the housing market in May to leave prices flat.

The forecast from Hamptons is the latest evidence to suggest that the immediate post-lockdown surge in the market is beginning to wane as first time buyers in particular struggle with economic impacts and the lack of availability of high loan-to-value mortgages.

Nevertheless, Hamptons said the UK will recover from 2022 onwards to see overall growth over the next four years of 8%, with growth strongest in the North, Wales and Scotland. London and the South east are expected to see rises over four years of 6% and 5% respectively.

However, the firm said its forecast assumed that a Brexit trade deal would ultimately be concluded successfully, and that a vaccine for covid-19 becomes available in the first half of next year, without which prices could be impacted further.

Aneisha Beveridge, head of research at Hamptons International, said: “We believe house prices will end 2020 having picked up from where they started at the beginning of the year.

“But the real challenges won’t be felt until 2021. The economic consequences from the Covid-19- induced recession will pull the housing market from its long-term growth trajectory. While some economic recovery should have taken place to cushion the withdrawal of government support, we still expect the housing market to slow next year.”

The forecast is supported by data from research firm Pantheon Economics, which showed declining use of key search terms in Google related to the housing market during September. Pantheon told the Times newspaper that the data suggested house prices will peak in October, at about 3 per cent above their pre-Covid level and then fall back by the same amount over the following 12 months.

It also comes as property portal Zoopla released its latest monthly housing market report, which suggested that demand, while still high, had begun to wane, particularly among first time buyers.

Earlier this month, forecaster the Centre for Economic and Business Research reiterated its prediction that house prices will fall by as much as 14% as a result of the covid crisis.