The traditional summer lull looks unlikely in 2021 as activity in the housing market continues. Heightened consumer confidence, low mortgage rates, an increase in the availability of high loan-to-value mortgage products and a continued search for space continue to support demand from first-time buyers and home movers alike. Low stock levels continue to underpin prices.
The annual change in house prices have increased in all regions of the UK, except for London. House prices were up by 18.4 percent in the South West, the highest in the UK. The North West had a 15.9 percent increase, closely followed by Yorkshire & the Humber by 15.8 percent, the West Midlands by 15.6 percent, the East Midlands by 15.2 percent and the South East by 15.1 percent, year on year.
The first half of 2021 has proved the busiest ever recorded in the housing market; over 880,000 properties changed hands. Nearly 200,000 sales took place in June prior to the stamp duty deadline, over twice the June average (2011-2019) and the highest monthly total ever recorded. Meanwhile, the value of mortgage lending hit a record £43.8 billion (Bank of England). The market has drawn breath in recent weeks, new mortgage approvals fell by 6 percent in June while buyer demand dipped by 7 percent in the four weeks since June 28th (Dataloft Demand Index). However, with over 81,000 mortgages approved in June, over 20 percent higher than the longer-term June average, and agents reporting buyer enquiries remain steady, the market remains buoyant (Bank of England, RICS).
With the success of the vaccine rollout, the reopening of selective travel corridors and the removal of the final COVID-19 restrictions, it is unsurprising consumer confidence is on an upward trajectory. In July UK consumer confidence moved ahead of its pre-pandemic level, with a dramatic seven-point jump in the major purchase index of those agreeing that now is the ‘right time to buy’ (GfK). At +10, PwC report consumer confidence is at its highest level since its survey began back in 2008. Although inflation has breached the government’s 2 percent target, there is little suggestion that interest rates will rise soon; mortgage rates remain close to their all-time low and affordability is on par with longer term averages. The increased availability in recent months of high loan-to-value mortgage products, thanks to the government-backed guarantee, provides support for both those looking to upsize and make lifestyle changes, and those looking to purchase their first home. Zoopla reports lending to first-time buyers has risen 25 percent year-on-year.
The latest monthly index produced by Nationwide reports that the average price of a property in the UK rose by 10.5 percent in the year to July. With lifestyle changes and a search for space still fuelling many buying decisions, the supply/demand imbalance has been most acute for larger homes, those with four or more bedrooms, which has led to such properties witnessing the strongest levels of price growth. Rightmove reported a 39 percent surge in four-and-more-bedroom sales versus a 15 percent fall in stock coming to the market in the first half of 2021, compared to 2019. In the prime market, average prices have risen by 11 percent. Double-digit price growth is evident across all prime market regions of the UK except London. Price growth is currently strongest in the sought-after South West and North West.
Housing market activity is expected to remain buoyant over the summer months and into September, given the incentive for purchases to be completed to avoid additional tax. However, although the IMF has upgraded its forecast for UK economic growth to 7 percent for 2021 (up from 5.3 percent in April), the direction of the market in the final quarter of the year may well depend on the impact of the removal of government support packages on the labour market and consequently household incomes. Price growth may edge downwards but looks set to remain firmly in positive territory.
With an increase in consumer confidence and greater availability of high loan-to-value mortage products, is it the perfect time for you to sell your home? Get in touch with your local Fine & Country agent to get started today.
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