UK property prices will plunge by 13.8% next year after a recent mini-boom begins to rapidly unravel, new research suggests.
The Centre for Economic and Business Research (CEBR) highlighted Britain “housing market paradox,” with soaring activity in recent months despite Britain only just emerging from the steepest recession on record.
A study by the economic forecaster said many of the drivers of the recent rebound in sales and prices were “transitory in nature,” and predicted as they tail off, prices will start falling later this year.
The CEBR highlighted stamp duty cuts in England and Northern Ireland, the furlough scheme, greater pent-up demand for purchases than sales post-national lockdown, and the suspension of most repossessions and forced sales as major factors buoying up the market.
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It noted there were just 161 mortgage repossession claims issued between April and June, compared with 6,000 during a typical three-month period. Meanwhile the CEBR estimates almost 150,000 transactions were put on hold between March and June, fuelling subsequent demand.
The CEBR expects pent-up demand will “work its way out of the system” in the coming weeks, while the furlough scheme is already being wound down and mortgage possessions will resume from 31 October. The stamp duty holiday ends next April, also hitting prices bar an expected “short spike” in the run-up to the deadline.
The economic consultancy also argued housing activity over the summer is more likely to have been “skewed towards higher-value properties, distorting some of the unofficial [mortgage lender] data.” The greater economic hit on lower-income workers of the pandemic is likely to have shifted the kind of properties being sold towards more expensive properties, it indicated.
“Our analysis suggests that prices will start to fall significantly towards the end of the year and the first half of 2021,” it said in a note.