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What will happen to house prices in Cardiff in 2021?

Mon 11 Jan 2021


We’re sure you’ll agree that 2020 was not the year everyone expected – and least of all for the property industry! But what will happen to property prices in Wales in 2021? Will we see price rises in both the sales and lettings sectors? Moginie James’ property experts give us their predictions for the year ahead…

Despite all that happened last year the housing and rental market in Wales remained surprisingly resilient, with a surge in demand driven by the pause on Stamp Duty, and UK house prices experiencing the biggest monthly rise in 16 years.

Now that we are in 2021, the Brexit deal is confirmed which has taken away one area of uncertainty for the trajectory market. However, with the Stamp Duty Holiday still set to end in March, and the national lockdown having made a return, there is likely to be just as much change in the property sector in 2021.

To try and make sense of what could arise in the Cardiff property market over the next 12 months, the directors at Moginie James have answered the most asked questions about the future of the sales, lettings and buy-to-let markets.

Will property prices in Cardiff rise in 2021?

The demand for property in Wales is currently at an all-time high, and during the summer peak of 2020, properties were selling for their asking price, or in some cases, more. According to Land Registry data, as of September 2020 the average house price in Cardiff is £216,491, rising by around £5,000 on average year-on-year.

Our prediction is that house prices may soften slightly but will stay resilient and stable in 2021, particularly for three- and four-bedroom properties. For example, detached properties in Cardiff have risen in price by nearly £16,000 on average year-on-year, while smaller terraced homes rose in value by £6,452 on average year-on-year.

There will, of course, be regional variations across the country, and while we are likely to see prices in some areas rising, some of Wales’ big cities and town centres may see a fall of around 3-4%. This is particularly true for flats, where there is an oversupply in town and city centres.

Rents are easier to track as they can’t outpace wage growth and we expect to see a steady increase of 1-2% for rents 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.

Will the Stamp Duty (LTT) holiday be extended?

The number of people buying and selling property since the introduction of the Stamp Duty holiday last July has grown phenomenally. 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 for Wales next year, as well as provide a welcome boost to the wider economy. 

We remain hopeful 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.

Where do people want to live?

Having to spend more time at home during 2020, and now starting 2021 in lockdown, has led many to seeking more space. Whether that’s moving to properties with gardens or separate areas to enable easier remote working or space to home-school children. With the commute to big cities still not having fully returned, we are likely to see a continued movement of ‘relocate to the suburbs’ in 2021, in order to upsize to properties meeting homeowners new found needs.

We have actually already seen reduced demand for flats in city centres, while we expect the desire for properties, both to buy and rent, in suburbs to continue to increase. We've had a lot of people moving up the chain and investors, but a lot of first time buyers too.

Will there be any changes for the let-to-let market?

Many homeowners will look into becoming both landlord and tenant this year in order to obtain a bigger property and more green space. According to Rightmove, home movers are having to pay almost £68,000 on average to move from a two-bed flat to a three-bed house – £4,000 more than in 2019. With the cost of trade-up moves rising and mortgage lending currently extremely competitive, we foresee that homeowners will choose to let out their existing property and rent a bigger house. This will enable them to quickly get the more spacious home that they desire, within budget. 

The let-to-let option will be increasingly used by homeowners this year. We suspect in particular among those in leasehold flats, or for those with properties seeing less demand who are finding it difficult to trade-up.

Will leaving the EU affect the housing market?

Now that we're into 2021 a Brexit deal has been negotiated and there is a sense of more certainty for the housing market and the deal is unlikely to have much of an impact on the sector in the short term. The economic recovery from COVID-19 and job uncertainty in Wales and across the UK is likely to have more of a potential impact on property prices. Of course, if, longer term, the Brexit deal causes wider job losses, this could affect the house prices, but in the short term, we will likely continue to see stability.

What will change about moving house?

Although not a new technology, Virtual Viewings saw a huge uplift during the first COVID-19 lockdown. And as such, the success has cemented Virtual Viewing technology as a firm feature of property buying, selling and renting that’s here to stay, not just a gimmick. Directors at Moginie James predict the technology will remain a strong part of the sales and lettings process in 2021 and beyond.

While we don’t expect virtual tours to take over the viewing process completely (buyers and tenants jumped back pretty quickly to wanting physical viewings of a property when the lockdown restrictions were eased), the convenience and simplicity of video tours will continue to help those unable to see a house physically, and reduce the time spent on wasteful viewings – for both buyers and sellers, as well as landlords and tenants.

Will there be any changes to how tenants are managed?

In lettings, we expect to see more agencies embrace Open Banking and online customer accounts for maintenance to speed up tenant reference checks, payments and maintenance resolutions. At LRG we have recently done just this, introducing Open Banking-based tenant referencing across our rental portfolio.

This technology allows our agents to scan a prospective tenant’s bank account transactions, if they grant permission, and determine their rent payment history instantly. This will allow landlords and agents to turn around affordability checks in minutes, instead of days, and provide better lettings management throughout the duration of the tenancy.

Are buy-to-let investments a good idea in 2021?

With so many businesses now working from home, many 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 in order to minimise risk.

Similarly, in direct-to-residential lettings, we’ll likely see landlords diversifying from one- and two-bed 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.

Will online estate agents grow in popularity?

In a constantly-changing market, we would expect that vendors will want local expertise of Cardiff 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 later in the year.

Preparing for next year’s property market changes

Following a year of quick 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 fluctuations in the economy, experts at Moginie James believe the housing and rental markets will stay resilient 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. Moginie James are ready and prepared to support our customers to make that change in 2021.

Want to talk to us about your property? If you’re looking to sell or let your home, start your property journey with a free, no obligation property valuation.

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