Housing Marketing Update August
Why are house prices continuing to grow and how quickly can you expect to sell. We take a look at the data from August in Burton and Derby.
This month we take a look at: The Economy | Transactions | Prices | Demand | Investments & Lettings | Developments and the Prime Market.
Economy
UK economic growth rose by 4.8% between April and June, as most businesses emerged from lockdown. The expansion in gross domestic product was fuelled by retail, restaurants and hotels (ONS).
The UK economy is predicted to grow by 5.75% in 2021, its highest rate in 70 years according to the latest forecasts by the Bank of England, the IMF has upgraded its forecast for 2021 to 7% (from 5.3% in April). The economy crashed by 10% during 2020.
The Bank of England predict inflation will reach 4% by the autumn, its highest level in a decade and twice the government's 2% target. Interest rates remain at 0.1%.
Transactions
The HMRC estimate nearly 200,000 sales took place in June, over twice the June average (2011-2019) as the Stamp Duty Holiday deadline approached. Over 100,000 sales have been recorded in each of the last nine months, June the highest monthly total ever recorded.
According to Rightmove this was the busiest first half of a year ever. There were 140,000 more sales agreed in the first half of the year and 85,000 fewer new listings than the long-term average. This imbalance created a 250,000 shortfall of homes for sale.
At 36 days, the time taken to sell a property (from marketing to SSTC) is 29 days shorter than at the start of 2021 (Rightmove). Properties are currently selling the quickest across the South West (32 days) and those in London taking 55 days.
Prices
According to Nationwide, annual property price growth was 11% in the year to August, month-on-month prices increased by 2.1%. The average price of a property in the UK is now £248,857.
Locally here in Burton, we have seen a House Price growth of 7.1% with the average price of a property now in Burton £196,488.
Overall, asking prices have fallen by -0.3% this month, this is the first price drop recorded in 2021. The upper end of the market saw the decline in asking prices, whereas first-time buyers and second steppers increased (Rightmove).
A net balance of agents (+66) sense prices will rise over the next 12 months according to the July sentiment survey released by the Royal Institute of Chartered Surveyors. Measures tracking new instructions have fallen for the fourth consecutive month while demand and sales measures remain positive.
The rise in prices of our homes has been underpinned by the lack of supply in the market. We expect that the rate of growth will start to moderate as we move towards the back end of 2021. The end of government backed schemes, namely the stamp duty holiday and the furlough, will be a major factor in the slowdown of house price growth.
Demand
Mortgage approvals in July for house purchase were 9.5% higher than July 2020. After peaking in June (£43.8bn), gross mortgage lending in July dipped back to £16.5 billion (Bank of England).
According to Rightmove buyer demand in the first week of August was up 56% compared to the same period in 2019 and down just 17% on the busy post lockdown period.
The Dataloft Demand Index shows housing demand is currently 22% higher than a year ago, as housing market momentum continues to be buoyant.
Over recent months we have seen a decline in the number of available homes on the market. As indicated earlier homes are seller quicker than any time in the last 12 months and often buyers are missing out on their dream home because they are competing with other buyers or are not in a position to make an offer.
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Here at Sure we saw just 10% of buyers registered in August, were either not on the market or currently on the market but with no offer. This has compounded the effect of supply and demand and increased the competition from buyers. We saw 37% of buyers registered in August were First Time Buyers and 36% of buyers investors.
The reassessment of homes among households, particularly for larger family homes with buyers searching for 'more space' has stretched the market and eroded available properties on the market. This squeeze has been felt further as first time buyers continue to enter the market and with over two thirds of buyers in the market not having a property to sell.
Continued stamp duty relief for First Time Buyers means the stamp duty holiday will have less of an impact on this buyer group.
Investment/lettings
Average rental values across the UK rose by 1.2% in the year to July 2021, rents in the UK excluding London increased by 1.9%. Northern Ireland (3.4%), East Midlands (2.5%) and South West (2.5%) experienced the largest increase in rents (ONS).
According to the RICS July sentiment survey, tenant demand rose for a fifth straight quarter, with a net balance of +52% of respondents noting a rise in demand.
RICS survey participants continue to envisage rental growth over the next 12 months, with headline projections standing at 3%.
Investors were able to take advantage of the lower purchase tax charges as a result of the stamp duty holiday. Demand from buy-to-let investors in the year to date has been some 21% higher compared to 2020, according to the last data from Zoopla. This has caused many landlords to review their existing portfolios.
Development/new build
During the first three months of 2021 over 37,000 private new homes were started and over 36,000 completed. The figures, released by the Ministry of Housing, Communities and Local Government represent the strongest start to a year for private new build activity since 2007.
The Leasehold Reform (Ground Rent) Bill was published on 13 May. When implemented it aims to tackle the ambiguity, unfair terms and liabilities of ground rents for future leaseholders who purchase new residential long lease properties.
A 'Commonhold Council' has been created by the Housing Secretary to promote property ownership reforms. Commonhold provides a structure to manage shared parts of the building, homeowners themselves having a shared responsibility.
Prime markets
Over 8,300 homes sold for over £1 million during the first three months of 2021 across England, the highest quarterly figure ever recorded buoyed by sustained activity across regional prime markets outside of London.
LonRes report there were 45% more sales of properties priced £5 million of more between April and June 2021 across prime areas of London than the longer term (2015-2019) average. Sales up to £1 million were 78% higher, the £15,000 stamp duty saving reducing the SDLT payable on a main residence by 66%.
Compared to a supply shortage across much of the UK, the number of available properties to purchase across Prime London was 20% higher year-on-year in June. With markets well supplied, there is little scope for price growth, many prime areas awaiting the return of overseas buyers to bolster demand.
Outlook
The low supply of homes listed for sales, especially family houses, and a limited choice for would-be buyers may well impact demand in the second half of 2021 and into early 2022. This will lead to a natural slow down of interest from buyers. 2022 looks likely to see a return to normal levels of activity in the later half of the year.
If you need any help or advice re your property/move (whether selling, buying, renting or letting), you can book an advice call at a time to suit you with one of our expert agents HERE.
