UK: House prices to soar 3% in 2021 - Capital Economics

FXStreet reports that a quick economic recovery, sustained fiscal support, and the housing-specific measures in the UK Budget mean it is likely that policymakers will successfully mitigate the adverse impact of the pandemic on the housing market. As a result, strategists at Capital Economics now think that house prices will avoid a fall, and instead rise by 3% YoY in 2021 and 2.5% YoY in 2022.

“The risks to the housing market from higher unemployment, both indirectly through its effect on sentiment and directly by causing distressed selling has reduced. Excellent progress in vaccination and government support to household incomes means that we expect a quick economic recovery when restrictions are eased.”

“While we still expect house prices to cool over the course of this year, we no longer expect them to decline. Annual house price inflation is set to remain high in the next two quarters as the base effect of a stall in house prices in Q2 2020, when the market was closed, boosts the annual comparison. But it is likely to ease off materially in Q4.”

“Our new annual house price forecast is +3.0% YoY in Q4 2021 and +2.5% YoY in Q4 2022.”