Sales market on course for busiest year since 2007!
Sales completions forecast to reach 1.5 million this year, up from 1.04 million last year and the highest level since 2007.
+4.1% Current UK house price growth +29% Demand for homes, YTD v 2020 -2% Flow of new supply, YTD v 2020
Executive summary • The value of sales in 2021 is forecast to be £461 billion, up 68% from 2019 amid a rise in higher value homes exchanging • Total stock of homes for sale remains constrained, down 20.8% in the year to mid-May compared to the average last year • Annual house price growth is at 4.1%, up from 2.3% a year ago • On a regional basis, the largest price growth is in Wales, at 6.3% and Yorkshire & the Humber at 5.4% • Price growth in London is at 1.9%, the lowest level since March last year.
Annual UK house price inflation at +4.1%
Average house prices rose at 4.1% in the year to April, up from 2.3% in
April last year, but down from 4.7% at the start of the year.
Prices are being underpinned by demand from buyers continuing to
outstrip supply. Price growth is highest in areas where affordability
is greatest. In the year to April, average prices in Wales rose by 6.3%,
followed by Yorkshire & the Humber where prices rose by 5.4%.
London continues to trail when it comes to price growth, at 1.9%, the
slowest regional rate of growth across the UK for the sixth
consecutive month.
On a city level, Liverpool (+6.9%) and Manchester (+6.8%) are
registering the highest price growth of major cities monitored in this
report (see map on page 6), the fifth consecutive months this has
been the case.
This level of price growth comes as buyer demand in these cities in
April was running at twice the levels than in more ‘normal’ market
conditions between 2017 and 2019, amid a 10+% decline in the
homes available to buy.
Across the UK, the demand for family houses continues to put
upwards pressure on this type of home, with average values for
houses up +5.2% on the year, compared to +1.1% growth for flats.
Sales completions forecast to rise to 1.5 million
Buyer demand has been strong since the end of the first lockdown
last year as households reassess how and where they are living. For
some, the need for more space, especially if working from home is to
be a more regular occurrence, has prompted a move. Many older
households are also re-evaluating their housing needs and moving
for the first time in many years. First-time buyers are also becoming
more active in the market, with better access to mortgage finance.
The stamp duty holiday introduced in July to March, and the
subsequent extension to June and tapered extension to the end of
September, has provided an added impetus for many to purchase a
home.
This demand for homes in the sales market led to a very busy start
to the year (as examined in March house price index report) with
£149 billion of homes sold subject to contract in the first 15 weeks of
the year.
We expect that activity will remain elevated in H2, albeit not as high
as towards the end of last year. Even so, we expect total sales
completions this year will be 1.52 million. This would mark 2021 as
the one of the most active sales markets since the global financial
crisis, and as one of the top ten busiest years since 1959.
The hottest and coldest markets
As shown on page 2, Wales, Yorkshire & the Humber and the North
West are the regional markets registering the highest price growth.
They are arguably also the ‘hottest’ regional markets at present – as
these markets are also among those where the market is moving more
quickly than the ‘normal’ market conditions in 2017-2019.
The time between a listing a property and securing a sale subject to
contract (SSTC) has fallen by between 10-15 days in the North West,
Wales and Yorkshire & the Humber, and this is accompanied by the
highest levels of price growth.
At the other end of the scale, homes are taking just under two months
to sell in inner London, two weeks longer than the 2017-2019 average,
making it a relatively cooler market. Annual price growth is also
lagging at +0.3% on the year. Four central London boroughs are
registering price falls for the third or fourth consecutive month,
including the City of London (prices down -2.5% year on year),
Westminster (-2.2%), Kensington & Chelsea (-1.7%) and Hammersmith &
Fulham (-1.4%). London is a global real estate market, and these areas
have been particularly affected by the global shutdown of
international business and leisure travel due to the pandemic.
Affordability constraints also remain a drag on the wider London
market.
The ‘hottest’ city markets, were homes are being sold more quickly and
price growth is strongest include Wigan, Blackburn and Burnley where
time to sell is down by three weeks or more, and annual price growth is
at least 5.8%.
Five of the 65 cities monitored for this report have registered an
increase in time to sell. Sales are taking longer in Aldershot (+1 day)
Southampton (+1 day), Gloucester (+2 days), Edinburgh (+2 days) and
Coventry (+8 days) bucking the wider trend of faster moving markets.
However annual price growth remains positive in all these cities.
Market Outlook
Demand levels have moderated since the peak in Q1 as the
economy opens up and life starts to return to some sort of ‘normal’.
As lockdowns continue to ease, demand levels will continue to fall
back, but we expect they will remain elevated compared to more
‘normal market’ levels, measured between 2017 and 2019,
throughout the rest of this year.
While the introduction of the stamp duty holiday has certainly
boosted activity, we believe the once-in-a-generation ‘reassessment
of home’ has further to run, a view a member of the Bank of
England’s MPC also shared in a speech last week.
The easing of lockdowns will cause a natural fall in demand as
people are able to see family and enjoy amenities that have been
shut for more than a year, new buyer demand will still emerge
throughout H2 as office-based workplaces confirm if they will be
pursuing more flexible working practices. Households who have the
opportunity to commute less frequently have more options when it
comes to choosing where to live, and this could prompt a move.
Likewise, older households will continue to review how and where
they are living, with many more set to move for the first time in years.
With an increased array of mortgages to choose from, first-time
buyers will also remain active in the market.
At the same time, supply constraints will continue underpin pricing.
The lack of supply is expected to hamper potential sales during this
year, yet even so, we expect total transactions this year to rise to 1.5
million, marking one of the busiest years in the UK’s residential
market in more than a decade.
Source: Zoopla