The monthly supply of new instructions also remains vastly below normal expectations across the UK (-38% compared to July 2020), with the South West worst hit by scarcity (-51%). Greater London, until now plagued by oversupply, indicates a distinct drop in the number of new vendors (down 30% compared to July 2020).
While still below their May 2016 peak, prices in the capital are beginning to rise and look to be entering a new period of growth, supported by a rapidly recovering rental market, especially in the more central boroughs. After an 18-month battering by the COVID pandemic, confidence is returning to the capital's property market.
The sales stock total in London has been steadily eroded by 16% since the oversupply peak in Nov 2020. Moreover, the supply rate of new instructions has moderated considerably compared to summer last year when urban flight caused a wave of panic selling. Demand looks set to increase on the back of rapidly rising rents as investors, both private and institutional, spot yield and capital gains opportunities.
Beyond London, shrinking sales and rental inventories continue to push up both prices and rents. The number of new instructions entering the sales market across the UK continues to be very low compared to pre-COVID levels (down 24% July 2021 vs. July 2019). The number of newly available rental properties entering the market is also down considerably across the UK (down 27% July 2021 vs. July 2020).
Sales supply looks set to remain low until mortgage payment forbearance schemes end. When these will be fully phased out by lenders is unclear but the end of the furlough scheme on the 30th of September has been confirmed by Chancellor Rishi Sunak, which may well cause an uptick in supply in both the sales and rentals markets. For the time being, rent arrears are relatively low (according to a Paragon survey), thanks in part to forbearance on the part of landlords, although job losses are feared as government assistance comes to an end for the 1.9 million furloughed workers, of whom an estimated 687,000 are renting.
The East of England and Wales now lead in terms of regional price growth, with annualised home price inflation of 11.2% and 10.7% respectively, supported by vast demand and a dearth of supply.
The tapering-off of the stamp duty holiday will have dampened buyer demand in these and other regional sales markets but it appears that supply is falling faster, ensuring that most parts of the UK remain a market for sellers. We continue to expect that prices and rents will continue to rise in concert, but at a slower pace, until there is a significant loosening of supply in either market.
The annualised mix-adjusted average asking price growth across England and Wales has slipped again to +7.6% this month; in August 2020, the annualised rate of increase of home prices was just 3.3%.
