Lenders, who have been forbearing in their approach to distressed borrowers so far, will at some point have to bring widespread mortgage payment holidays to an end.
What happens next?
All this points to a year in three parts.
Everything points to a strong first quarter, with elevated transaction activity and price growth. Early data from TwentyCi shows there were 37 per cent more sales agreed this January than in January 2020.
The ongoing experience of lockdown and home-working and schooling will support demand from people looking for more space. This, with a rush to beat the end of the stamp duty holiday, will keep pressure on prices up.
As that stamp duty holiday comes to an end, we can expect a lull in activity in parts of the market. When government introduced a stamp duty surcharge for people buying additional homes in April 2016, transactions spiked in March before falling again in April.
Those 2016 changes affected only investors and second-home buyers. The current holiday came as many homeowners were reassessing their housing needs and will affect a much wider range of buyers.
The impact will be more limited in lower price bands, where stamp duty was and will continue to be low or zero anyway, and in prime markets where the £15,000 saving is a small proportion of the overall bill.
But in those areas and market segments with average values close to £500,000, where the holiday saving is greatest, the impact could be felt more widely.
Finally, as the vaccine rolls out and lockdown measures ease, confidence and housing market activity will return. There will be a return to City life as employees return to shop floors and offices; restaurants and pubs will re-open. Perhaps we will even see further government support to kick-start consumption ('Eat Out to Help Out 2: Eat Harder').
For many, trading urban life for a bucolic cottage or a semi in the suburbs will be the best decision they have ever made. But as cities’ vitality and buzz return, so too will the draw of city-centre living.
Younger people who left London for their family home and international students will return. We expect to see both house prices and rents recover in urban areas as social distancing restrictions ease.
The longer-term picture
Has Covid-19 changed the way we view our homes forever? Or will the patterns of supply and demand return to pre-pandemic levels as soon as enough people are vaccinated?
The reality is likely to lie somewhere between these two extremes. While we can expect employees to return to offices at some stage, it seems unlikely that all will be expected to commute in five days a week as before.
