ARK’s Market Synopsis

Welcome to the latest edition of ARK’s market synopsis report covering market outcomes to the end of April and with Rightmove picking up reporting for May.

The reports continue the themes that have emerged over the last few months. London is reporting weaker growth than most of the UK. Wales, the North West (including Liverpool and Manchester) and Yorkshire and Humber show strong property price inflation providing, we argue, supporting evidence of an ongoing “drive to the countryside”.

The “race for space” is still a key driver with demand for traditional 3-bed type family homes remaining strong, in most locations demand for these homes is outstripping supply.

We have a sense that the commentators are becoming more optimistic about the later part of the year, they expect that unemployment increases will dampen demand but reading through the commentaries we have a sense that they seem to feel that market will be more sustainable than has been reflected in previous reports.

Highlights

Halifax marked in annual house price at 8.2% in April, making it the highest annual growth rate in 5 years. The average property now stands at £258,204 which is up 1.4% on a month-on-month basis. In the short term, the ‘search for space’ and government initiatives will continue as market drivers, this is an emerging theme coming through this month’s reporting.

Annual house price for Nationwide comes in at 7.1% for April – up from 5.7% in March. On a month-on-month basis, house price inflation stands at 2.1%. There remains caution for the end-of-year outlook at it is expected that unemployment will rise which will slow down market activity. However, housing preferences may continue to support market activity despite the weakening of the labour market.

One benefit of the pandemic has been the rise in savings. Traditionally, commentators are concerned that the UK public hold very little in the way of savings but in April’s reporting, Nationwide notes a rise in household deposits since the start of the pandemic “in the 12 months to February 2021, household deposits increased by £196 billion, equivalent to around £7,000 per household, and almost three times the amount accumulated in the same period the previous year.”

In the RICS reporting, new buyer demand seems to be pretty much the same as the previous month with a headline net balance of +44% in April (+43% in March).

The RICS saw a rise in newly agreed sales this was evidenced by a net balance of +34% of respondents noting an increase.

In regard to the twelve-month outlook, contributors anticipate a cooling in sales growth, with the headline net balance at +12%.

  • Another emerging trend from this month’s reporting is demand not being able to keep up with supply, the following commentators cite:
    “The number of fresh listings arriving on the market is insufficient to match the current levels of demand. Indeed, the net balance for new instructions fell to -4% in the latest results, down from +21% previously.” – RICS
  • “Prices are being underpinned by demand from buyers continuing to outstrip supply.” – Hometrack
  • “demand continues to massively exceed supply, especially in northern regions… it is the north that is seeing the greater imbalance between demand and supply and this is one of the main factors driving prices to new records in all regions except the capital. This supply shortage is particularly marked for typical family homes with three bedrooms or more, with available stock for sale on agents’ books in April down by an average of 50% on the same period in 2019” – Rightmove

Looking at Hometrack reporting, it is expected that total sales completions this year will be 1.52 million, marking the year as “one of the most active sales markets since the global financial crisis, and as one of the top ten busiest years since 1959.”

At regional level, Wales, Yorkshire & the Humber and the North West are registering the highest price growth. At city level, Liverpool (+6.9%) and Manchester (+6.8%) registered the highest price growth – this is the fifth consecutive month this has been the case.

On the flip side, London registered price growth at 1.9% – the slowest regional rate of growth across the UK for the sixth consecutive month. Annual price growth for London is at +0.3%. Four central London boroughs are registering price falls for the third or fourth consecutive month, including the City of London (prices down -2.5% year on year), Westminster (-2.2%), Kensington & Chelsea (-1.7%) and Hammersmith & Fulham (-1.4%).

Moving onto Rightmove for May’s reporting. The average price of property coming to market is at £333,564 an increase of 1.8% (+£5,767) – above the previous all-time high recorded a month ago.

Rightmove’s year-on-year comparison echoes Hometrack’s April report as it illustrates Wales (+13.0%) as the fastest-growing region followed by Northwest (+11.1%), and Yorkshire & the Humber (+10.5%) whereas London lags at +0.2%.

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