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Near-term pain, medium-term gain

Rising unemployment and the withdrawal of the raft of policies that supported the housing market in 2020 means that the pandemic will finally take its toll this year. The end of the stamp duty holiday will cause transactions to slump at the same time as rising unemployment feeds through to a modest rise in forced sales. We think that the result will be a 4% drop in house prices this year, reversing much of the 6.5% increase recorded in 2020. The medium-term outlook is more promising. Vaccination will allow the economy to recover quickly and we expect Bank Rate to remain at 0.10% for the foreseeable future, allowing mortgage rates to decline a bit further. If we are right, house price growth is likely to outpace pay growth from 2022. Global State of Play, 28th January, 0800 GMT and 1600 GMT. In the first of our regular briefings of the year, Group Chief Economist Neil Shearing will lead a discussion about the economic impact of vaccination programmes, another US fiscal stimulus package and fresh lockdowns in China.

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