The COVID-19 pandemic has caused a lot of economic uncertainty and changed the way the housing market functions. In the short term, there has been a spike in housing prices due to lower supply and more people needing space while they work from home. Will these higher prices hold in the future or is a big crash coming? According to a report from the experts at Savills, there are a few trends to expect in the upcoming years.
Early 2021 May Look Grim
Despite the recent rebound, Oxford Economics is predicting a sharp spike in unemployment by the end of 2020. This may lead to a small decline in the real estate market. Higher unemployment rates may result in fewer developments and less demand for housing. Housing prices may not plummet, but at first, they will remain relatively stable instead of exhibiting their usual upward trend. This effect is particularly likely to show up in the lower half of the market since luxury real estate has been less affected by the pandemic.
Future Looks Bright for Later in the Year
Despite a small contraction in the market for late 2020 and early 2021, analysts remain overall positive. Oxford Economics predicts an 8.5 percent growth in the economy for 2021, with unemployment levels gradually reducing towards the end of the year. As the economy recovers, Savills believes there will be a corresponding bump in real estate prices. By 2022, they expect to see housing prices rise by four percent. In the next few years, housing prices are expected to gradually expand.
Certain Sectors Are More Likely to Do Well
Certain parts of the United Kingdom have been less affected by the pandemic, while others are more likely to struggle with the upcoming foreign investment tax. Overall, the northwest is the area most likely to see a big rise in housing prices. Next on the Savills forecast for high growth in Scotland, Yorkshire, and the Humber. Other UK regions that are likely to have higher levels of real estate growth than the rest of the nation are the East and West Midlands, Wales, and the north-east. Investing in real estate in these regions has the highest potential for growth.