Why now could be a good time to join the market!
“As we move into 2022, there will be a strong start to the year in line with seasonal trends, but after that, a return to more usual levels of activity among first-time buyers, the effect of the ending of the stamp duty holiday, and some buyers waiting for more stock to become available will result in a slow repairing of stock levels through H1.”
CLICK TO SEE WHAT YOU COULD ACHIEVE IF YOU WERE TO JOIN THE MARKET NOW? Coming hot on the heels of HMRC announcing a near 63% fall in transaction volumes between June and July, Zoopla has published its latest House Price Report, which puts numbers on what most agents already are aware of – the acute lack of sales stock in the wake of the frantic market that led up to the beginning of the end of the stamp duty holiday.
While buyer demand remains strong, up +20.5% compared to the 2020 average, stock levels are down 26.4% compared to the 2020 average.
Looking back further, total stock is down 33% compared to this time in the more normal markets of 2018 and 2019.
Competition amongst buyers has been intensifying throughout the second half of 2020 and 2021, spurring the market to move faster. The average time to sell (the time taken between listing and sale agreed), is now running at 26 days, down from 49 days in 2019.
Sales agreed are running at 21% above levels seen in the summer of 2018/19, ultimately eroding supply, with one in 20 homes changing hands over the past year, compared to one in 25 homes in the 12 months to June 2019.
Supply constraints are pronounced for homes priced up to £350,000 – reflective of where average affordability lies for UK homemovers. Meanwhile, as the pandemic and its lockdowns continue to shape the ongoing demand for more space, it’s the supply of three and four bed family homes that is most stretched.
Demand for family homes is clear in the price growth statistics; while the average flat in the UK has increased in value by 1.2% in the past 12 months, the average house has increased by 7.6% over the same period.
Housing stock has been eroded by high levels of activity, and new listings running around 5% below average since the start of the year. In addition, increased activity amongst first-time buyers and investors is absorbing stock while failing to replenish it.
First-time buyers have been increasingly active in 2021, supported by lenders who have reintroduced products that facilitate higher LTV mortgages. Momentum for this demographic has further to run after some were squeezed out of the market last summer, and also because of the stamp duty relief they will continue to enjoy even after the end of September.
Investor demand is also up more than 21% compared to the 2020 average, boosted by stamp duty relief. Strong demand for rental properties is likely to continue for investors, even as wider tax changes in recent years have caused some landlords to review their portfolios.
Finally, the supply of new homes, which has slowed in 2021 due to the temporary hiatus in the construction industry during the first lockdown, is down 11% in England, and while supply has started to pick up again, the dip has had an impact on the volume of homes available to buy.
The narrowing in choice of homes to buy, especially for family houses, means the market will start to slow naturally during the rest of the year and into next, as buyers wait for more stock to become available. While we anticipate a strong start to 2022 in line with seasonal trends, there will be a slow reparation of stock throughout the first half of the year.
The mismatch between supply and demand is supporting overall UK house price growth. Running at +6% year on year, this is down slightly from June’s growth of +6.3%, but up from +2.3% in July 2020.
The headline rate of growth is expected to moderate slightly down to +4 – +5% by the end of the year, as the SDLT impetus wanes and the government withdraws stimulus packages such as furlough, but this will not be a linear progression.
At a regional level, property price growth is highest in Wales (+9.4%), Northern Ireland (+9%) and the North West of England (+7.9%); at a city level, Liverpool continues to lead the way with price growth of +9.4% over the past year, resulting in an average price uplift of £11,731 per property.
Manchester and Belfast follow, with +7.7% and +7.5% growth respectively. By contrast, London is still trailing, with an annual +2.5% rise, although this marks a rise from 1.9% growth in March this year.
Gráinne Gilmore , Head of Research, Zoopla, comments:
“The post-pandemic ‘reassessment of home’ – households deciding to change how and where they live – has further to run, especially as office-based workers receive confirmation about flexible working, allowing more leeway to live further from the office. This means higher levels of demand will still be evident, and potential vendors with family houses to sell could be in pole position.
“However, the lack of supply, especially for family houses, means the market will start to naturally slow during the rest of this year and into next year, as buyers hold on for more stock to become available before making a move.
“As we move into 2022, there will be a strong start to the year in line with seasonal trends, but after that, a return to more usual levels of activity among first-time buyers, the effect of the ending of the stamp duty holiday, and some buyers waiting for more stock to become available will result in a slow repairing of stock levels through H1.”