Demand +80% above 2017-19 figures
Buyer demand in the UK housing market is falling from record levels, but it is still well above more normal market conditions; +80% above 2017-19 figures.
The newly-released Zoopla UK House Price Index Report, a monthly analysis of UK property market data and annual price growth figures for the UK, reports this and the following:
Overall, the average value of a home in the UK reached £230,700 in June, which is a 30% rise since the previous market peak in 2007.
Prices continue to be supported by the strong levels of demand in the market. While buyer demand has eased since the April peak, they are still running 80% higher at this time of year compared to more ‘normal’ market conditions between 2017 and 2019.
The Zoopla report states: “As the economy opens up, it is to be expected that demand will ease again, especially as the holiday season starts. But there will still be active buyers driven by the ‘search for space’, households making lifestyle changes and the increased activity among first-time buyers, and these trends have further to run through H2.
“Low mortgage rates are making a home move more affordable, with Nationwide launching the first sub-1% five-year mortgage deal this month for those who only need to borrow up to 60% of the value of their home. At the same time, the supply of homes is not keeping pace. The flow of new supply has started to return to more usual levels for this time of year, but it is not enough to replenish stock levels, which are running 25% below average 2020 levels.
“Supply has been constrained by the rise in activity among first-time buyers (lending to first-time buyers is up 25% compared to 2020), who have nothing to sell, but also by the sheer levels of activity in the market which has eroded the total number of homes for sale. This, in turn, may be hampering some potential activity in the market. Even so, the number of sales agreed are still running 22% ahead of 2020 average levels, and will remain higher than previous years as homeowners continue to take advantage of the extended stamp duty holiday - with savings of up to £2,500 on offer until the end of September. We forecast there will be around 1.5 million completed transactions this year, up from 1 million last year, and the highest level since 2007.”
A common theme of moves during lockdown is search for space. People active in the market are looking for more indoor and outdoor space when they move.
The Zoopla report states that this trend is also apparent in the data, with demand for houses now twice that registered during 2017-19. In contrast, the demand for flats has not kept pace, up +34%. As a result of this healthy demand, average prices for houses, through from terraces to detached, are up 7.3% in the year to the end of June, an increase of 1.9% in the previous 12 months.
In contrast, price increase for flats is lagging behind at 1.4%, which is not changed compared to the last 12 months.
Zoopla reports that demand is levelling from record high levels earlier in the year, but remains significantly up from normal levels, signalling that above average activity levels will remain in the coming months.
When it comes to demand for houses outstripping demand for flats, the report states: “To a certain extent this trend will have been augmented by the stamp duty holiday, with bigger savings on offer for larger properties - typically houses. But underneath this, there is a continued drumbeat of demand for more space, both inside and outside, again funnelling demand towards houses, resulting in a disparity in price growth. Vendors will need to consider this when it comes to pricing expectations.”
Looking ahead, the report predicts: “Across the UK, buyer demand coupled with constrained supply signal that price growth will continue to rise in the coming months, peaking at around 6%, before easing to between 4%-5% by the end of 2021.”
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