This morning's figures revealed that prices are being underpinned by demand from buyers continuing to outstrip supply and that 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, 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.
Market outlook
Zoopla says that 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. However, Zoopla expects that 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, it is believed 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.
Zoopla also suggests that 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 to 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.
John Eastgate, Managing Director of Property Finance at Shawbrook Bank, comments: “The pandemic has pushed London to the bottom of the house price inflation league, but as we face into what seems to be a solid recovery, there can be little doubt that it will soon be gaining places and rising up the table. If we look to the medium and longer-term, our city centres will recover and thrive as workers return.
“With solid fundamentals underpinning the property market even after the end of the Stamp Duty holiday, there’s a strong argument to suggest that our cities, London in particular, represent good value today for both homeowners and investors.”
Nigel Purves, CEO of Wayhome commented: “We’re continuing to see a strong demand for homeownership, with annual house price growth 4.1% higher than last year, as the ‘race for space’ continues to pick up ahead of the Summer. However, with demand from buyers continuing to heavily outweigh supply there are clear imbalances to be aware of.
“Those who’ve managed to accrue savings over the last year are likely to be taking advantage of the record low-interest rates and Government initiatives to secure homes that truly meet their changing needs after a year in lockdown. But others aren’t so lucky; many are stuck in rental properties which aren’t fit for purpose, and homeownership is out of their reach despite earning good incomes.
“We need to see real change and fast. Creating options that will ensure those who find themselves trapped in a renting cycle have an alternative route onto the property ladder is key. For this to become a reality, innovation is needed to create new pathways into homeownership.”
Sundeep Patel, Director of Sales at specialist lender Together, commented: “Demand for homeownership across all customer bases shows no signs of abating, with buyers jostling to make the most of the Stamp Duty extension ahead of it tapering off on the 1 July. Indeed, the total value of homes sold in the UK this year is predicted to reach £461bn, an increase of 46% against 2020.
“That said, while record-low interest rates and government incentives have clearly boosted activity, there are severe supply and demand issues to be cautious of in the long-term. Indeed, while it’s difficult to forecast what the property market will look like as we recover from the pandemic, we’re confident flexibility will be a top priority for hopeful borrowers and their needs in the future, given the financial considerations caused by the pandemic”.
