What’s next for house prices and what will happen to the property market in 2020?
IT’S been a slow year for the UK’s housing market due to political uncertainty and Brexit woes. But now that we have a Conservative majority and MPs have backed Prime Minister Boris Johnson’s Brexit deal, what’s next for house prices? We’ve spoken to the experts to find out exactly what they think is in store […]
IT’S been a slow year for the UK’s housing market due to political uncertainty and Brexit woes.
But now that we have a Conservative majority and MPs have backed Prime Minister Boris Johnson’s Brexit deal, what’s next for house prices?
We’ve spoken to the experts to find out exactly what they think is in store for the property market in 2020 – and it’s good news if you live outside of London.
House prices in the north of England and the Midlands are set to flourish in the New Year as companies slowly look to move their businesses to cities outside of the capital.
First-time buyers have had a good 2019, with low prices and interest rates, but the good fortune isn’t expected to continue into 2020.
Affordability is predicted to squeeze those trying to get on the property ladder if house prices and interest rates rise.
Of course no-one can predict the future, but here’s what experts reckon you can expect from the housing market next year.
Homeowners will choose to improve instead of move
Once again, homeowners have Brexit looming over them and exactly what impact this will have on house prices is still unknown, even if MPs have finally backed Boris’ deal.
This year, an uncertain Brexit dramatically slowed down the housing market as homeowners held back putting properties up for sale while they waited for Brexit uncertainty to pass.
The UK is now expected to leave the EU by the end of January 2020.
“We don’t yet know the full extent of the impact of Brexit and it’s unlikely that this state of uncertainty is going to subside any time soon,” explained Martijn Van Der Heijden, chief strategy officer at online mortgage broker Habito.
This uncertainty has meant many people have stayed in their homes rather than sell-up.
Changes in regulation earlier this year means homeowners can now build a single storey extension without planning permission.
And homeowners are expected to spend a collective £5.5billion on improving existing homes in the next 12 months, according to review site Checkatrade.
Fraser Clark from property portal Nested.com said: “It has reached a point where it’s just not financially viable for some people to move if prices go any lower.”
The issue with homeowners opting to extend their houses instead of sticking them up for sale means there will be a shortage of larger homes on the market, Mark Scott, chief property analyst at online estate agent Yopa warns.
While property expert Emily Evans adds that while buyers will always negotiate the price down if the kitchen or bathroom needs replacing, this is something sellers won’t take too kindly to after already having to lower prices in the current climate.
It’s going to get harder for first-time buyers
Fewer homes on the market will have a knock on effect on the types of properties available, which will largely impact first-time buyers in 2020.
They’ll face stiffer competition for fewer affordable houses from an influx of buyers who are also holding off until after Brexit to get on the property ladder.
In turn, this could push prices up even more, making it even harder to become a homeowner, warns Mr Clark from Nested.com.
He explained: “It is unlikely that in 2020 property prices will decrease any more than they already have.
What help is out there for first-time buyers?
GETTING on the property ladder can feel like a daunting task but there are schemes out there to help first-time buyers have their own home.
Help to Buy equity loan – The government will lend you up to 20 per cent of the home’s value – or 40 per cent in London – after you’ve put down a five per cent deposit. The loan is on top of a normal mortgage but it can only be used to buy a new build property. You can no longer open a new account, but existing account holders have until December 1 2030 to claim the bonus.
Lifetime Isa – This is another government scheme that gives anyone aged 18 to 39 the chance to save tax-free and get a bonus of up to £32,000 towards their first home. You can save up to £4,000 a year and the government will add 25 per cent on top.
Shared ownership – Co-owning with a housing association means you can buy a part of the property and pay rent on the remaining amount. You can buy anything from 25 to 75 per cent of the property but you’re restricted to specific ones.
“First dibs” in London – London Mayor Sadiq Khan is working on a scheme that will restrict sales of all new-build homes in the capital up to £350,000 to UK buyers for three months before any overseas marketing can take place.
Starter Home Initiative – A government scheme that was supposed to see 200,000 new-build homes in England sold to first-time buyers with a 20 per cent discount by 2020. To receive updates on the progress of these homes you can register your interest on the Starter Homes website.
“This is because it has reached a point where it’s just not financially viable for some people to move if prices go any lower.”
Lettings negotiator Oli Watson, from Dwells estate agency in Leeds, warns that house prices are expected to rise faster than wages over the course of next year.
The first few months of the year will be the best time to buy a home, he says, while Brexit uncertainty keeps prices low before an expected bounce in February.
First-time buyers who’ve been waiting to see if the government will introduce stamp duty reforms are also advised to take the plunge in the first half of the year.
He said: “Although Boris Johnson has hinted towards raising the threshold for stamp duty for everyone from £125,000 to £500,000, they have more recently distanced themselves from these claims.”
Mr Watson also believes an impending house price rise will offset any savings made due to a reduction in stamp duty.
London house prices are unpredictable
House prices in the capital have dropped by an average of 0.4 percent over the year to September, according to the Land Registry and Office for National Statistics’ UK House Price Index.
Property portal Zoopla reckons the market will drop by another 2 per cent next year if interest rates rise as expected.
They reckon it will make affording a mortgage even harder, slowing down the market in turn.
But property portal Rightmove believes London house prices have actually plateaued in the second half of 2019 and feels that a small 1 per cent rise is on the horizon.
Mike Scott, property expert at Yopa, added: “The south and east of England will probably continue to do worse than the rest of the country, as prices there have become overheated in recent years, and some regions in and around London could still have further to fall.”
House prices outside of London will rise again
Throughout 2019 we heard plenty about how political uncertainty had pushed down London house prices – but what about the rest of the UK?
Land Registry figures show house prices in Wales rose more than anywhere else in the UK in the year to January 2019, and the value of property in the north also saw a boost.
Most read in money
Dwell’s Mr Watson explained: “House prices generally correlate with changes in income, and if we follow that trend, then the north west of England and the Midlands are likely to see the biggest increase in house prices.
“This is due to a lot of big businesses moving their operations out of London and the south east and towards the north west.
“The economies of Manchester and Birmingham are growing as such a rate that they are developing their own “commuter belts” so house prices in areas 10 to 50 miles radius of these cities are expected to rise the most.”