Advertisement

Demand for houses spikes after Budget while new supply still lags

Zoopla’s House Price Index shows annual price growth at +4.1%, up from +1.8% a year ago.

House prices climbed by 0.5% in between December and February, taking the annual rate of growth to 4.1%. This is down from 4.4% growth in January, but marks the fourth consecutive month price growth has been above 4%, matching levels last seen in summer 2017.

The Chancellor’s announcement of a stamp duty holiday extension and 95% mortgage guarantees created a 24% spike in buyer demand in England in the days following the Budget, as more first-time buyers and movers entered the market.

Average buyer demand levels since the start of this year are running 13% higher than average levels across the whole of 2020. The largest post-budget bounce in demand was for three-bed houses.

While there was a slight post-budget rise in supply, overall supply levels remain deeply constrained, with total supply this year down 13% vs the 2020 average. As lockdowns ease and vaccinations continue to be rolled out, pent-up supply will come back to the market as vendors feel more comfortable opening their homes for viewing.

Increasing activity levels among first-time buyers, especially as they take advantage of more 95% mortgages from April 1st, will keep pressure on the demand/supply imbalance however, as these buyers have no properties to sell.

Demand for homes is strongest in the most affordable parts of the housing market, boosting price growth. The annual rate of change in house prices are near decade-high levels in the Midlands and the North. In contrast, the level of price growth in the South of England is lagging slightly.

Continued demand for larger family homes as buyers look for more inside and outside space in the wake of multiple lockdowns is putting upward pressure on the value of houses, especially as supply remains constrained. Across the UK, the average price for a house has risen by +4.9% over the last 12 months, compared to a +1.9% increase for flats.

The number of sales agreed in the year to date are up 5.3% compared to 2020. But the sheer demand in the market has had a dramatic effect on how quickly sales are being agreed. The average time to sell a property has fallen by nearly a week across the UK. This means it is taking around 44 days from listing a property to agreeing a sale, down from 50 days last year.

The Chancellor’s announcement of a stamp duty holiday tapered extension means that hundreds of thousands more buyers will benefit from some level of stamp duty reprieve.

Allowing four months for completions after agreeing sale means that most buyers now will be looking to benefit from the stamp duty holiday on the first £250,000 of their purchase, by completing by the end of September, rather than the first £500,000 which means a completion by the end of June.

zoopla.co.uk

 

Advertisement