There is an assumption that after the vacation plan ends, the unemployment rate will soar, and house prices will plummet. However, 2021 may become less direct.
This is a strange moment for the UK real estate market.
Despite the unusually strong sales activity in the past six months, it is generally believed that this will end in 2021.
We have discussed the debate about property taxes, purchase assistance, Brexit, and vaccines, but the hypothesis that prices and sales will fall next year is mainly centered on the end of the March vacation plan.
Before the latest round of Brexit uncertainty erupted, the Office of Budget Responsibility, Oxford Economics, Capital Economics and Economics and Business Research Center’s forecasts for UK house prices all indicated that next year’s decline was between 5% and 14%.
Knight Frank predicts a 1% growth in 2021. This number is subject to review, and it highlights how a series of reactionary forces can make housing prices in 2021 more static.
First of all, Nationwide and Halifax emphasized this year’s growth momentum, and both stated that prices rose by more than 6% in the year to November. It is not uncommon in April to predict that prices will fall by 20% this year.
There is evidence that making short-term predictions in an unprecedented event like a global pandemic is not a simple task. Indeed, in the three months ending in April this year, the difference between the UK’s GDP performance and the UK’s National House Price Index was close to 21 percentage points, the highest level since 1955.
Second, compared with previous recessions, it has its own unique labor market dynamics and interest rate background, and its use is also limited.
Indeed, there is little uniformity in the performance of various sectors of the economy in 2020.
The government’s assessment of which part of the economy is most affected has reached some unsurprising conclusions. Hospitality, retail, and construction are the industries most affected. Industries such as finance, technology, the public sector, and science are examples of job creation this year.
Lee O’Neill, the head of Knight Frank’s Canary Wharf (Wary and Wagon) and municipal office, said: “I talk to people in the financial world every day, and I don’t see any signs of trouble. “The actual change that has occurred since the lockdown is that many people are making faster decisions, and these decisions are more emotional and practical.”
Although the impact of COVID-19 is random among different sectors, so far, it has disproportionately affected young people. More than half of the jobs lost between the first quarter and the third quarter of this year were between the ages of 18 and 24, which is a more common group of rents. Those who are still on vacation have a more even age distribution. The influence of lower socioeconomic groups is also greater.
Savvas Savouri, chief economist at Toscafund, said that increased skills transfer capabilities are another reason why 2020 is different from previous recessions.
He said: “On the theory that the end of the vacation means housing prices will plummet, I opened a red line.” “In the previous recession, the entire industry was collapsing. Towns and cities have been affected. Skilled manual workers are the mainstay of the economy, and they have to work at lower wages. Of course, the unemployment rate will rise next year. Still, although physical retail and leisure companies will lay off workers, some the industry needs recruitment with similar skills, such as e-commerce and logistics. That’s where the narrative around housing prices fails.”
It is worth considering how much wealth has been accumulated during the pandemic and will support housing demand. Andy Haldane, the chief economist at the Bank of England, estimates that by 2020, there will be £100 billion in excess savings, and spending will pick up at a “real rate.”