Vendors remain confident but London exodus continues
Despite the extraordinary events of 2020 the UK property market remains on a firm footing overall as we commence the new year, according to Home.co.uk’s latest Asking Price Index.
Home prices are up 4.9% overall and the market is showing significant momentum. Neither Brexit fears nor Covid have managed to topple this vital part of the economy, although the measures enforced to contain the pandemic have radically changed the nature of supply and demand.
However, thus far the London exodus has not pushed down prices significantly, save for some more central locations. Growth remains at 3.0% year-on-year overall for the Greater London region and this is remarkable in itself given current events. Looking forward to how 2021 will play out, we see opportunity for further scarcity-driven price growth in the regions and a period of readjustment for the capital.
Reports that mortgage approvals have reached a 13-year high, together with the Covid vaccine rollout, is welcome news and buoys confidence in the property market and the wider economy. The announcement of grant aid for the hospitality businesses of the UK will also be well received given the new and potentially lengthy lockdown. However, it is unrealistic to think that the UK property market will not be affected by the worst economic downturn in 300 years. In fact, the warning signs are already apparent. Rent arrears are on the rise, with more than half of UK landlords surveyed by the National Residential Landlords Association having lost income due to the pandemic. This is clearly not a sustainable situation.
Indeed, the true level of economic devastation is as yet unknown. Given the best outcome, that the virus is brought under control by vaccination, restarting the economy will not be like switching a light back on. Many businesses (and livelihoods) will simply be gone forever and it will take time for those businesses that remain to return to profitability. Moreover, forbearance on the part of mortgage lenders is likely to be limited in the absence of further government intervention. Precisely how many homeowners will be forced to sell in 2021 due to job losses and business failure is as yet unknown.
For the time being, the UK property market remains in good shape but dark clouds of uncertainty loom over both the sales and rental sectors for the year ahead. The annualised mix-adjusted average price growth across England and Wales is currently a remarkable +4.9%; in January 2020, the annualised rate of increase of home prices was a mere 0.3%.
- Asking prices hold firm, nudging up 0.1% across England and Wales since last month and retaining last year’s growth.
- The mix-adjusted average asking price for England and Wales registers a remarkably upbeat growth of 4.9% year-on-year.
- Extraordinary levels of supply continue in Greater London (total new listings up 68% in December compared to December 2019), although unsold stock levels have reduced slightly for a second consecutive month.
- By contrast, supply across the English regions, Scotland and Wales is outpaced by demand and this is pushing up prices. Overall, total stock for sale in England and Wales has fallen to a new record low thus bolstering vendors’ confidence.
- The northern property markets indicate phenomenal strength, with the Yorkshire and Humber region showing stunning year-on-year price growth of 10.1%, followed by the North West with an annualised gain of 8.2%.
- Greater London is currently the UK’s worst- performing region with only 3.0% growth overall, weighed down by supply and significant price falls in more central areas.
- Average prices dipped in just two regions of England and in Scotland during the last month.
- The market retains exceptional momentum with the Typical Time on Market at a mere 101 days for unsold property, 19 days less than in January 2020 (England and Wales), while UK-wide supply is up a mere 14% year-on-year (including London).
- UK rents have fallen 0.9% year-on-year, dragged down by an exodus-induced average drop of 16.9% in the Greater London lettings market.
- By contrast, great scarcity is evident in most English regions and in Wales, thereby forcing up rents. The largest annualised hikes are in the East Midlands (+14.0%) and the West Midlands (+16.8%).
- Greater London continues to indicate an oversupply in properties available to rent (+37% year-on-year). This worrying situation is already weighing heavy on the capital’s buy-to-let sales market and is likely to be exacerbated by the latest national lockdown.