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Housing market momentum sees house price growth reach highest level since 2017

The strong bounce in home buyer demand has been boosted by an increase in first-time buyers looking to step onto the housing ladder, according to our House Price Index.

Guest Author
Words by: Annabel Dixon


Momentum in the housing market shows no sign of slowing, with the number of housing sales agreed 10.1% higher than this time last year.

Home buyer demand - in other words, people looking to buy a home - has been bolstered by the return of first-time buyers. And it continues to outstrip the supply of homes for sale, driving UK house prices up 0.3% in January.

The annual rate of house price growth now stands at 4.3%, the highest level since April 2017. It means that the average home is worth £226,600, according to our House Price Index.

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What’s happening to house prices?

At a country and regional level, house prices have climbed the most in Wales, with the country’s annual growth rate standing at 5.6%. North west England is hot on its heels, with house prices in the region rising 5.5% year-on-year.

At a city level, Liverpool and Manchester are once again the hottest local markets, with year-on-year house prices increasing 6.8% and 6.3% respectively.

How busy is the housing market?

So far this year, buyer demand is up 12.4% compared with the same six weeks in 2020.

The stamp duty holiday, which offers an average saving of £4,500, has spurred many people to search for a new home. 

Meanwhile, the experience of successive lockdowns and working from home as a result of the pandemic has prompted many people to carry out a once-in-a-lifetime re-assessment of their homes and lifestyles. And this, in turn, has been the catalyst for a lot of home moves too.

The strong bounce in demand has been further boosted by an increase in the number of first-time buyers in the housing market (for more, see below).

But the supply of homes for sale is failing to keep pace. The number of new homes listed for sale is 14.5% below 2020 levels, with the overall number of homes being marketed down 13.8% on last year. There are two reasons for this.

Firstly, despite the housing market being open for business, some sellers are continuing to press pause on allowing home viewings during the current lockdown. Our Research & Insight team expects sellers to progress with marketing their homes for sale once restrictions ease.

Secondly, our data points to a resurgence of first-time buyers, who have no property to sell when they move.

This mismatch between the levels of buyer demand and homes for sale is evident across most of the country, and most acute in the north east of England and Wales.

There is one exception to this trend: London. Buyer appetite to move in the capital city is down 17% 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.

What could this mean for you?

First-time buyers

First-time buyers are making a comeback to the housing market. The number of sales agreed on homes valued between £100,000 and £250,000 – a price range that first-time buyers are typically more focused on – has jumped 18% since the start of the year.

And the level of first-time buyers looking to step onto the housing ladder is up 5% in the first six weeks of the year compared with the end of 2020.

This chimes with an uptick in the number of mortgages available for buyers with a 5% or 10% deposit. While lending in this area is not back up to levels seen in early 2020, the number of high loan-to-value deals – in other words, mortgages for people with a smaller deposit – has risen since the end of 2020.

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This momentum is expected to continue as first-time buyers are eligible for a first-time buyer stamp duty exemption (beyond the current tax holiday). 

First-time buyers can also apply for the government’s Help to Buy equity loan scheme, designed to help people buy a new-build property with just a 5% deposit. A new version of the scheme launches in April and will only be available to first-time buyers.

It comes after a tough year for aspiring homeowners. The pandemic, coupled with the shrinking range of mortgages for people with smaller deposits, forced many first-time buyers to put their home buying plans on hold.

It contributed to the market share of first-time buyer sales in 2020 reaching its lowest level in four years, accounting for 31% of all home sales, down from a peak of 35% in 2018.


Older, more established homeowners, many of whom are not reliant on mortgages, are continuing to push ahead with moving home. They have boosted cash purchases to 30% of all home sales – a 12-year high.

Homeowners are being driven in particular by a search for space, eyeing larger homes, or homes with more outside space.

And as the vaccine roll-out continues to gather momentum, and Covid-19 cases start to recede, more homeowners are expected to progress with marketing their homes for sale – and look for their next property to buy.

Landlords and investors

Some investors are reviewing their portfolios, according to our House Price Index. The proportion of homes listed for sale that were previously rented climbed in nearly every region last year.

And this is particularly noticeable in London, where 13% of homes being marketed for sale in the last three months of the year were previously rented.

There could be a number of reasons for this. Find out more in our article, Why are some landlords selling up?

It’s worth noting that this remains a small trend within the wider rental market. The number of rental homes listed for sale in the second half of 2020 accounts for less than 1% of privately-rented homes.

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What's the outlook?

Gráinne Gilmore, head of research at Zoopla, said: "The strong bounce in demand seen at the start of the year has been further boosted by increased numbers of first-time buyers active in the market.

"Many of these buyers will be taking advantage of the increased number of home loans now available for purchasers with smaller deposits, and most will be less concerned about the ending of the stamp duty holiday on 31 March.

"First-time buyers have no property to sell, so their increased activity in the market is further pushing up buyer demand ahead of supply.

"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% 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."

What impact could a stamp duty holiday extension have?

The case has been growing for an extension to the stamp duty holiday. And the latest media reports suggest that the government could extend the stamp duty holiday by three months.

Gilmore explained: “Moving the stamp duty holiday deadline means that the 70,000 buyers we previously predicted would miss the stamp duty holiday are now ‘safe’. This figure was calculated on sales agreed late last year and early this year.

“However, with the extension looking likely to run until the end of June, up to 234,000 home movers who have already agreed a sale are set to benefit from this holiday, saving buyers a total of £984m.

“Whilst January and February this year are often busier times in the market, this year both demand levels and sales agreed have been noticeably higher than usual.

“Given that stamp duty is traditionally a southern tax, it’s likely that buyers in London and the South East will benefit most from the extension. We are likely to see an uptick in demand in the coming weeks, particularly in these regions.”

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