Kevin Shaw, National MD Sales, and Michael Cook, National MD Lettings from Leaders Romans Group, one of the UK’s largest property lettings services groups, look at the UK property market in 2021.

2020 was perhaps the most unpredictable year in property, thanks to the pandemic and its effects on the UK economy. However, the housing and rental market has stayed remarkably resilient, with a surge in demand happening over the summer due to the pause on Stamp Duty, and UK house prices experiencing their biggest monthly rise in 16 years.

Now, with Brexit negotiations ongoing, the Stamp Duty holiday set to end in March, and the trajectory of the pandemic still uncertain, there is likely to be just as much change in the property sector in 2021.

To try and make sense of the property market in the coming year, we’ve laid out our predictions for sales, lettings and the buy-to-let market in 2021.

2021 property predictions

House prices will stay resilient

One of the biggest questions over the property market for the coming year is: “How will housing prices change?” Demand in the housing market is currently at an all-time high and during the summer peak, properties were selling for the asking price, or even more. We briefly saw house prices soften prior to the second lockdown. But now, with positive news of vaccines, we are seeing another strong boost to the housing market.

Therefore, our prediction is that house prices will stay resilient and stable in 2021, particularly for three- and four-bedroom houses. There will be regional variations and we are likely to see prices in some areas rising.

Some of our big cities and town centres, however, may see a fall of around 3-4%, particularly for flats, where there is an oversupply in town and city centres, with much more development already in progress.

Rents, meanwhile, are easier to track as they can’t outpace wage growth. Therefore, we expect to see a steady increase of 1-2% in 2021. However, as with house prices, this is likely to be lower in bigger cities, where we are seeing less demand, and be higher in suburbs or on city outskirts.

The Stamp Duty holiday will likely be extended

The house sales pipeline has grown significantly since the introduction of the Stamp Duty holiday this year. We’ve already seen calls to extend the deadline from the property sector, and that announcement would really encourage continued and much-needed momentum in property sales in 2021, as well as provide a welcome boost to the wider economy.

Of course, it’s unlikely to be extended indefinitely, so we hope the Chancellor will announce in March that the holiday will be extended until the end of 2021. This will allow for house sales that didn't get through in time to still take advantage of the reduction in Duty, as well as keep the housing market thriving.

Upsizing to the suburbs will continue to grow in demand

Having to spend more time at home this year has led to many of us seeking more space, looking for gardens and separate areas to enable easier working from home or to home-school children. With the commute to big cities still not having returned, we are likely to see a continued ‘escape to the suburbs’ in 2021.

Conversely, we are already seeing reduced demand for flats in city centres, while we expect the desire for properties, both to buy and rent, in suburbs to continue to grow.

More homeowners will embrace the let-to-let-market

Following the trend for upsizing, many homeowners will become both landlord and tenant next year to obtain a bigger property and more green space. With the cost of trade-up moves rising and mortgage lending currently extremely competitive, we foresee homeowners choosing to let out their existing property and rent a bigger house to get the spacious home they want, quickly and within their budget.

Technology will transform the way we move home

Virtual viewings saw a huge uplift during the pandemic, and we predict that these will still stay a strong part of the sales and lettings process in 2021. We don’t expect this to take over the viewing process completely – buyers and tenants jumped back pretty quickly to wanting to physically view a property when the lockdown had lessened. But the ease and convenience of video tours will continue to help those unable to see a house physically, and reduce the time needed for wasteful viewings – for both buyers and sellers, as well as landlords and tenants.

There’ll be an uptick in buy-to-let investments in residential property

With so many companies now working from home, many commercial property tenants are downsizing their office space. This uncertainty in the commercial sector will lead many landlords and investors to diversify their portfolio and invest in more residential property developments to minimise risk.

Similarly, in direct-to-residential lettings, we’ll likely see landlords diversifying from one- and two-bedroom flats into three- or four-bedroom houses to secure their investments, matching the demand for larger properties. With interest rates low and the stock market volatile, property is still one of the few places that people can secure investment in for the longer term, so the buy-to-let market will continue to be buoyant. The Midlands and the North in particular will be attractive thanks to the current lower prices and increased yields.

Online estate agencies will dip in popularity

In a constantly-changing market, vendors will want local expertise from their estate and letting agencies to help them through. So, we predict a shift away from online-only agencies towards those with a high street presence. Online agencies currently account for only around 8% of all transactions, but this might slip again if the market gets more challenging in 2021 than the boom in demand that we have seen this year.

Preparing for a year of change

Following a year of rapid and unexpected change to the housing market, the property industry has had to adapt quickly. That preparation has put the industry on a good path for 2021. Despite the fluctuations in the economy, the housing and rental markets will stay buoyant next year – especially following support from additional Government measures, such as the extended Furlough scheme and the potential extension of the Stamp Duty holiday.

The pandemic has changed how we all think about our homes and where we live, possibly forever. Estate agents and letting agents must now prepare to support their customers to make that change in 2021.