Gráinne Gilmore, head of research at Zoopla, takes stock of the housing market and, in our video, reveals her 3 key takeaways from the latest House Price Index.
Q. Gráinne, what’s happening to house prices across the country?
A. House prices are rising at nearly 4% a year, with the average home now worth £222,900. To put this into context, this is the highest level since August 2017. But the UK headline rate of growth hides a varied regional picture, with growth ranging from 5% in the north of England to 2.8% in the east of England.
House price growth in many areas has been prompted by a mismatch between supply and demand. We have seen demand levels rise by an average of 40% year-on-year, and in some areas by much more, and that’s despite the closure of the housing market during the first national lockdown.
But the flow of homes coming onto the market last year was just 4% more than in 2019. Put simply, there aren’t enough homes for sale to soak up demand – and this is putting upward pressure on house prices.
Our data and forecast models suggest annual house price growth will rise to 5% and then stay there for the first three months of this year.
Q. 2020 was a tumultuous year. So why was there record demand for housing?
A. The housing market was one of the bright spots of the economy last year. The pandemic and its subsequent lockdowns and restrictions led many people, who had spent longer than usual in their homes, to carry out a once-in-a-lifetime re-evaluation of their home and lifestyle, stimulating home moves and driving a search for space, such as an extra bedroom or office space.
This has been captured in our data, which reveals that there were 9% more new sales agreed in 2020 than in 2019. And because it typically takes three to four months to legally complete on a sale, a slice of these deals will spill over into 2021.
We also saw a shift in the type of buyers active in the housing market. More people in wealthier areas, where house prices are typically higher, are planning a move. On the other hand, some first-time buyers have been hit by many lenders pulling their mortgages for borrowers with small deposits.
All of which means that the total monetary value of sales agreed in 2020 is 26% higher than 2019, bringing the annual figure to over £300bn.
Drilling down into the data, it’s worth noting that sales activity in the south of England in particular is coming off a historically low base. So last year’s bounce-back in general housing market activity, combined with higher selling prices, means that the total value of homes sold in the south east and east of England is up 37% on 2019.
Q. What’s the most sought-after type of property?
A. While the value of all types of property is climbing, the search for space that I mentioned is having a knock-on effect on prices.
It has prompted the value of houses to rise twice as much as flats, with the average rate of year-on-year growth for houses standing at 4.3% compared with 1.8% for flats.
Q. Traffic on Zoopla surged by 70.5% on Boxing Day. What does this mean for the months ahead?
A. There’s traditionally a spike in interest in moving home on Boxing Day as people turn their attention to the year ahead. But this most recent seasonal surge was far higher than the 61% increase recorded on Boxing Day in 2019.
And the momentum seems to be sustained, with searches on Zoopla for December up until 26th up 33% on the same time period the year before.
With the stamp duty holiday due to end in March, we expect to see this housing market activity intensify as buyers focus their efforts on securing the tax saving.