Momentum in the housing market shows no sign of slowing with housing sales 10 per cent higher than this time last year, according to the property website Zoopla
Its latest figures show the annual rate of growth in property prices reaching 4.3 per cent, the highest level seen since April 2017.
The market is being driven by buyer demand, as people look to take advantage of the temporary stamp duty holiday. Zoopla says with demand continuing to outstrip supply, house prices rose by 0.3 per cent in January, with the average property now costing £226,000 according to its house price index.
Zoopla’s figures show that house prices have climbed the most in Wales, with the country’s annual growth rate standing at 5.6 per cent. Other areas that have seen strong growth include the north west of England, with house prices rising 5.5 per cent year-on-year in the region.
At a city-wide level Zoopla says Liverpool and Manchester have seen buoyant growth with prices in the urban areas rising by 6.8 per cent and 6.3 per cent respectively.
Zoopla says that home buyer demand this year is up 12.4 per cent when compared to the same six week in 2020 .
It points out the stamp duty holiday means homebuyers save an average of £4,500 on a house purchase. Under current proposals this holiday is due to end at the end of March, however there has been widespread speculation that the chancellor Rishi Sunak will extend this in next week’s Budget.
Zoopla says the housing market is also being supported by the successive lockdowns and the switch to home working. This has prompted many people to re-evaulate current living arrangements and lifestyle and has been a catalyst for a number of home moves and relocations.
It says the strong bounce in demand has been further boosted by an increase in the number of first-time buyers in the market.
However supply has failed to keep pace with demand, with the number of new homes listed for sale being 14.5 per cent below 2020 levels, and the overall number of homes being marketed down 13.8 per cent on last year.
Zoopla says there are two reason for this. Some sellers it says are reluctant to allow viewing in the current pandemic, despite the housing market being open. Secondly it says its data points to a resurgence of first-time buyers who have, by definition, no property to sell.
It says these trends is evident across most of the country, and most acute in the north east of England and Wales.
However, there is one notable exception to this trend: London. Buyer appetite to move in the capital city is down 17 per cent compared with last year, when there was a surge in housing market activity. However, it’s important to note that when compared with previous years, it is still well ahead of the average.
Zoopla noted that the number of property purchases made with a cash sale now account for 30 per cent of all home sales, a 12 year high. Zoopla says many of these are from older more established homeowners who are not reliant on mortgages.
It added that many property investors appear to be reviewing their portfolios with the proportion of homes listed for sale which were previously rented climbed in nearly every region last year. Zoopla says this is particularly noticeable in London, where 13 per cent of homes being marketed for sale in the last three months of the year were previously rented.
It added this remains a small trend within the wider rental market, but could be prompted by landlords looking to crystallise capital gains before any rumoured changes take place. At the same time rents have been falling in some city centres and landlords may be looking to take advantage of the buoyant housing market.
Zoopla head of research Gráinne Gilmore says: “As the growth in demand continues to outstrip the supply of homes, it puts more upwards pressure on prices. We can see this in the 4.3 per cent average price growth in the year to January, matching the highest level of growth seen in nearly four years.
“One area of the market where there is more supply coming to the market is among landlords who are bringing their investment properties forward for sale.
“The share of homes listed for sale which were previously rented has risen in nearly every region during 2020, as landlords reassess their portfolios in light of current rental trends, or ahead of possible tax changes for investment property. “While the homes for sale account for a very small proportion (less than 1 per cent) of rented stock, it is a noticeable trend emerging in the market.”
Chesterons head of research Nick Barnes says: “Following a record December, the sales market has maintained momentum throughout January 2021.
“Compared to January last year, Chestertons registered 9 per cent more instructions, indicating that sellers remain keen to move home. This is further highlighted by a 47 per cent year on year increase in properties currently on the market.
“Equally, we have agreed 27 per cent more sales, largely driven by house hunters rushing to meet the stamp duty holiday deadline.”
But many mortgage experts though have pointed to the fact that this stamp duty holiday is artificially increasing prices and could create problem further down the line,
Shawbrook Bank managing director of property finance John Eastgate, called for more substantial reform of the housing market. He says: “The truth is that house prices and levels of activity have been artificially inflated in recent months, by the rush to complete transactions before 3 March. Therefore, any data looking at the first quarter won’t paint an accurate, or even realistic, picture of the current state of the market.
“Reports of a potential extension to the holiday are welcomed but there will always been an end point which could leave the market unstuck. We are in now in the unfortunate position where further government intervention is required to avoid the damage that an immediate end to the holiday will bring.
“The chancellor has the opportunity on Budget day to offer real time solutions to the issues which currently trouble the property market; namely an inefficient planning system and an environment that discourages private investment. Rishi Sunak must adopt a more considered approach to housing for the long-term that will offer genuine stability while avoiding the need for more knee-jerk responses.”
MetLife head of income protection Rich Horner says: “While today’s figures suggest that house prices are remaining steady, to know how resilient the market really is we must turn our attention to the chancellor’s budget next week.
“Naturally there is enthusiasm for an extension to the stamp duty holiday from buyers in the process of completion, and strong rumours of an extension until June may allow more people to take advantage of the incentive. What we should remember though is that there will always be an end point.
“For sellers who can overlook the current question mark, the market should remain resolute in the longer term with current levels of demand outstripping supply, particularly at the lower end of the market.”
Wayhome chief executive Nigel Purves adds: “Although we entered the new year in a third national lockdown, December’s positive momentum has rolled into 2021 as would-be buyers rush to beat the stamp duty deadline.
“We’ve seen priorities shift as individuals look for larger homes with additional space. The government’s roadmap suggests working from home is set to become the norm for many industries for at least the next six months, so that trend is likely to continue.
“All eyes are now on the Budget to see the financial ramifications for consumers and businesses alike. Now more than ever, there are significant numbers of reluctant renters longing for the safety net which comes with homeownership, but struggling to save enough money to get together a deposit. We need to find alternative ways to help people find a property, which provides them with the security and stability they need.”
Private rental platform Canopy CEI Tahir Farooqui says: “While first-time buyer demand may be up, the fact of the matter is house prices still remain too high for many looking to make their move onto the property ladder.
“The stamp duty holiday has relieved some of the pressure for those looking but it has also led sellers to increase their prices, creating artificially high house prices. Homeownership is out of reach for many and raising a deposit or securing a mortgage just feels like a pipe-dream. This shouldn’t be the case.”
