New Year demand for property up 50%* - rivalling record demand registered during the stamp duty holiday
UK housing demand up 49% compared to the recent new year average** - as demand for family houses outperforms levels recorded in the final six months of the stamp duty holiday
The average house price in the UK is now £242,000, up from £216,500 at the start of 2020
Prices for houses (terraced, semi-detached and detached) now average £289,500, while flats average £175,700 - up 8.8% and 2.2% respectively year on year
Demand for flats is on a sharp upward trajectory for the first time in several years, with demand outside London hitting the highest level in five years *** as relatively modest price increases help reignite the popularity of flats amongst buyers
Meanwhile, demand for family houses outside London is four times higher than the five year average
Supply turns a corner as total stock of homes for sale is 44% down on five year average - a slight rise compared to -47% at the end of last year
Strong buyer demand in the market pushed annual price growth to 7.4% in December, down from 7.7% in September, but still marking one of the highest rates of price growth since 2014
Thursday 27th January, 2022, London: The start of the New Year has seen demand for property soar by 49% compared to the new year markets of 2018 - 2021, rivalling record demand seen during the stamp duty holiday. These are the latest property market trends according to Zoopla, the UK’s leading property destination, in its monthly House Price Index.
Pandemic continues to shape the property market as demand for space has further to run
2022 continues to be focused on the pandemic-led search for space, and it’s three-bed houses in particular that are most sought-after.
The demand for three-bed houses outside London is driving this trend, being four times higher than the five year average (see fig.1) , becoming the most listed for sale on Zoopla in the month to 16th January.
Geographically, the suburbs remain in the highest demand with Thurrock (Essex), and the suburbs of Birmingham, Glasgow and East London (Barking & Dagenham) all topping the list of most sought-after areas.
Property agnostic: demand for flats reaches highest level for five years
As hybrid working continues to become the norm and city workers slowly return to offices, demand for flats is on a sharp upward trajectory, reaching its highest level for five years. Many agents are reporting that relatively modest price increases (2% for flats compared to 9% for houses) have helped reignite their popularity amongst buyers.
Given the concentration of stock the demand for flats is almost entirely unique to cities. In London it has reached the highest level for 19 months, with agents reporting an influx of overseas buyers from Hong Kong proving prolific in the flats market thanks to the new BNO visa rules.
Supply of homes finally turns a corner
Despite unprecedented levels of demand for additional space by families and a sharp rise in demand for flats by office workers, supply constraints may have finally turned a corner. Whilst the total stock of homes for sale is still -44% down on the five year average, this is a rise compared to -47% at the end of 2021, indicating that new supply is indeed coming to the market.
Some buyers may be spurred on to move with many keen to lock in a home loan before interest rates start to rise - amidst expectation that the Bank of England will increase the base rate further in 2022.
Even so, the current levels of mortgage rates and bank base rates will remain low by historical standards (see fig.2), and the increased popularity of fixed-rate deals**** mean that many homeowners will be protected from rises.
House prices predicted to rise in 2022 but at a slower rate than 2021
The average price of a house is now running at £242,000, representing 7.4% growth YoY. Terraced, semi-detached and detached homes now average £289,500, while flats average £175,700 - up 8.8% and 2.2% respectively year on year, demonstrating the recent divergence in demand.
However, despite the increase in house price growth is predicted to slow as the housing market returns to more normal market conditions in 2022.
Grainne Gilmore, Head of Research, Zoopla, comments: “The effects of the pandemic on the housing market cannot be underestimated. Even after nearly two years, the pandemic-led ‘search for space’ is one of the factors creating record demand for homes this month. The market is also being boosted by office-based workers re-thinking where and how they are living amid more hybrid working models. But in some cases, as offices re-open, some demand is flowing back into city centres.
Couple this trend with the return of international demand and the more modest prices rises in flats compared to houses over the last two years, and it’s clear why we are now seeing record-high spike in demand for flats outside London, and the highest rate of demand for flat in the capital than at any time since the end of the first lockdown.
Just like much of 2021, the number of homes available for sale is lower than typical levels, but there are signs that the imbalance between demand and supply is starting to ease. As more potential sellers are able to find a home to move to, this will spur more supply in the weeks and months to come.”
Tom Bill, Head of UK Residential Research at Knight Frank comments, “Demand has been unrelenting since the UK property market re-opened in May 2020. Cheap finance, high volumes of accumulated savings and a desire for more space and greenery have fuelled activity, none of which will disappear overnight.
Apartments are also moving back onto the radar of buyers as lockdown restrictions are lifted, which has created a temporary sweet-spot of extremely high demand. As interest rates normalise, demand will calm down without going into reverse. The employment outlook for the UK is positive and while inflationary pressures are lingering longer than most people would like, there is no sense they will be permanent.
The other factor that will usher in more normal conditions is rising supply. As Covid restrictions begin to feel irreversible, supply will increase and apply the brakes to the gravity-defying price growth seen over the last two years.”
*New Year demand for property up 50% compared to previous New Year periods.. **New Year average measured over the past three years
***Demand for flats reaches highest level for five years excluding London
****74% of borrowers hold fixed rate mortgage deals according to UK Finance
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