2021 looks set to be the bounce back year for the PCL market

Alpa Bhakta, Butterfield Mortgages Limited

By Alpa Bhakta, CEO of Butterfield Mortgages Limited  – It goes without saying that 2020 was an unprecedented year for the UK property market. The Covid-19 pandemic and the ensuing lockdowns meant that the entire real estate sector was effectively frozen for months, with transactional activity stalling as a result. But then, tax incentives introduced by the UK Government facilitated the fastest rise in residential house prices since 2015. Needless to say, it’s been a tumultuous year.

But what interests me specifically is how the Prime Central London (PCL) property market has fared, and its outlook for 2021. London has been the epicentre of the most recent spike in Covid-19 cases, so it’s unlikely that there will be a flurry of activity at the very beginning of this year. However, I believe that the two changes to Stamp Duty Land Tax (SDLT) planned for the coming months will incentivise a new wave of domestic and international buyers to the PCL residential real estate market in H1 2021. 

Stamp Duty reform offers a (short) window of opportunity 

The most notable government initiative that’s been implemented to spur housing market activity was the Stamp Duty Land Tax (SDLT) holiday on 8 July. This tax relief, offering savings of up to GBP15,000 for those purchasing property in England, sparked a momentous return of buyer activity. According to Nationwide, UK house prices increased by 7.5 per cent in 2020; the highest rate annual growth recorded for six years. Part of this success has to do with the fact the holiday could also be used by non-UK residents. 

At the time of its announcement, Chancellor Rishi Sunak stated that the SDLT holiday would be in place until 31 March 2021. So far, there has been no indication of the holiday being extended, though momentum is growing for such an action to be considered. Either way, I believe we are likely to see a flurry of activity over the coming weeks from prospective buyers eager to complete on transactions before this deadline.

This is especially true for the PCL market. Aside from the holiday, an additional a 2 per cent SDLT surcharge will be introduced for non-UK-resident buyers on 1 April 2021. This will have significant implications for the PCL market given non-UK residents represent a disproportionally large segment of PCL buyers; they were responsible for 41 per cent of PCL sales between January and November last year.

Should these reforms continue as planned, I predict there will be a slight slowdown in PCL market activity from April onwards. By no means should this be seen as a negative development. In reality it provides lenders, brokers and estate agents the opportunity to properly adjust to the post-Covid era. 

Of course, the recently imposed lockdown in England may pose an issue for buyers who wish to view properties in person before finalising their transactions. However, there is also the opportunity for buyers to virtually view properties, which is particularly helpful for international investors.  

Let’s not forget about Brexit 

Leaving Covid-19 to one side, we should also not lose sight of Brexit. While the UK has formally left the EU, there are still many questions for businesses in the financial services industry. 

For PCL property at the moment, however, I see no reason why Brexit would affect the level of London real estate transactional activity in any meaningful way. In fact, for international buyers, any devaluation of Sterling against other foreign currencies could even present opportunities for substantial discounts, as Knight Frank’s analysis from November showed.

Those involved in the prime property market feel that it has finally bounced back after years of modest performances. Projections from Knight Frank and Savills seemingly concur with such a conclusion, with both firms anticipating PCL house price growth of 4 per cent in 2021, and 12.7 per cent by 2024, respectively.

Looking to the coming 12 months, I am l excited to see what other trends will affect the prospects of the PCL property market in the future. 2020 was an unprecedently eventful year for our sector, though the rate of house price growth and transactional activity was impressive. With this in mind, we look set for an eventful 2021 as we hopefully overcome the Covid-19 pandemic and fully transition back to relative normality.  


Alpa Bhakta is the CEO of Butterfield Mortgages Limited. Part of the Butterfield Group and a subsidiary of The Bank of NT Butterfield & Son Limited. Butterfield Mortgages Limited is a London-based prime property mortgage provider with a particular focus on the needs of UK and international HNWIs. The views expressed herein are those of the author, and do not necessarily reflect those of the Butterfield Group.

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