Market Driven by Home-Mover – Race for Space Continues
House prices grew by 1.8% in June, according to Nationwide. This puts annual UK house price growth at 10.9%, the highest level of annual growth since August 2014. There has been strong house price growth in the past year. House price indices from both Rightmove and Halifax show the national average house price has also reached a record high. Data from Rightmove revealed the average price of a property coming to the market hit £333,564 in May, which is a new national record. This is 1.8% above the previous all-time high from the month prior. Halifax showed the average house price hit a record high for the second consecutive month in April, reaching £258,204. It will be interesting to see where we are at the end of June 2021 and whether there will be a further rise!
This double-digit house price growth has been driven by relentless buyer demand and dwindling supply. New buyer enquiries have continued to exceed new instructions, according to the RICS Residential Market Survey 2021 (April) while sales agreed volumes have exceeded instructions to sell throughout May, according to TwentyCi. This supply/demand imbalance points to further house price growth over the coming months.
Shifting buyer priorities and market composition have been key factors. Home-movers, spurred on by the Stamp Duty Holiday and favourable interest rates for lower LTV (loan to value) mortgages, have joined the ‘race for space’, with many upsizing to larger homes with gardens. As a result, we have seen greater activity in the higher price bands, and a rise in the average size of home transacted. Strong value growth, putting more equity in home-movers’ pockets, will be an added advantage and may sustain high activity beyond the Stamp Duty Holiday.
Completed transactions in April were lower than the record-breaking levels seen in March as buyers rushed to beat the original Stamp Duty Holiday deadline but were still 59% above the 2018-20 average. Sales agreed remain high, 42% above the month’s 2017-19 average. Therefore, we anticipate another boost to transaction numbers before the end of June, as the first deadline to benefit from the maximum £15k stamp duty saving is reached (30 June 2021).
The average UK rent increased 1.2% over the year to May, according to the ONS. Rents grew the most in the South-West and East Midlands, up 2.3% in both regions, and least in London, up 0.1%. London was the only region to see rental falls over the last month and quarter, suggesting a slower recovery here than other parts of the rental market.
95% Mortgages – and not just for First Time Buyers
The Government’s 95 % mortgage scheme continues to provide aa guarantee to lenders across the UK who offer mortgages to people with a deposit of just 5% on homes with a value of up to £600,000. Under the scheme, all buyers will have the opportunity to fix their initial mortgage rate for at least five years should they wish to. The scheme, which will be available for new mortgages up to 31 December 2022, will increase the availability of mortgages on new or existing properties for those with small deposits.
We’ve heard from so many buyers over the past year about their challenges to raise a 15% or 20% deposit, with a number saying they had to put their plans on hold, so the availability of 5% deposits will really help this all-important market sector.
By reducing the deposit required (when interest rates are at an all-time low) the Government is encouraging people to move out of rented accommodation and onto the housing ladder. So, no doubt it will bring more first-time buyers into the market. This will reduce the minimum deposit for the average Norfolk first-time buyer to just £10,100.
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What will happen next?
With Budget 2021 incentives in place, we can expect an increase again in buyer activity and sellers will be similarly motivated and everyone encouraged by the expectation of some sort of return to normality provided by the vaccination programme. With restrictions extended a further 4 weeks into July 2021, it will be interesting to see what impact this has. It could be a year when the moving aspirations of many are realised, and a developing trend is the influx of traditional city dwellers looking to move to the country or coast (check out out the research survey we’re supporting Moving to the Country) There is some potential for prices to rise and therefore getting in early could be the key for those who do not currently own a property.
At Watsons, we understand that everyone’s move has a different story to tell and we are here to assist, advise and inform you. Our goal is simple – to provide a best-in-class service through each stage of your property transaction. For more information on our services, get in touch via our website.
