ARK’s Market Synopsis

Welcome to the latest edition of ARK’s market synopsis report covering market outcomes to the end of January 2021 and with Rightmove picking up reporting for February 2021.

There is an interesting difference in outlook starting to appear between the commentators this month. Halifax, who have been toward the gloomier end of the medium and longer-term outlook continue in a similar vein together with the RICS and Nationwide.

Hometrack and Rightmove are in a brighter place. Obviously, the reports are not yet able to factor in the influence of the Chancellors announcements which will potentially have a positive impact on demand.

We have commented before that the underlying element in the market is a lack of production, we are still woefully short of completing 300,000 homes per annum to meet latent demand.

Changes in the way people live and work post the pandemic will continue the “race for space”; that is good indoor space standards and good private or communal spaces. The “drive to the countryside” is likely to see more rural developments outperform city and suburban schemes for the foreseeable future.

HIGHLIGHTS

In Halifax’s reporting for January, UK house price slipped by -0.3%, marking the biggest monthly fall since April last year. The average house price came in at £251,968 – around £13,000 higher than a year ago. Market activity seems to be slowing down with the annual rate of house inflation sitting at 5.4% – lowest level since August 2020.

Furthermore, Halifax says, “agreed sales remain well above pre-pandemic levels but new instructions to sell have decreased noticeably, and total stock held by estate agents has risen to its highest level since before the EU referendum in 2016.”

Like Halifax, Nationwide also noted that house prices month-on-month fell by 0.3% – the first decline since June 2020. In addition, annual rate of house growth slowed to 6.4% from a reading of 7.3% in December.

The slowdown is said to be due to the initial deadline of the stamp duty holiday. But as we saw earlier this month, Chancellor Rishi Sunak unveiled in his 2021 budget that he will be extending the stamp duty holiday until June, after that the nil rate band will be set at £250,000 until the end of September. We are hoping that market activity will pick up post this announcement and await later reporting to see the effects.

Nationwide also mentions “The total number of mortgages approved for house purchases in 2020 actually exceeded the number approved in 2019, and house price growth ended 2020 at a six-year high, even though the economy was probably around 10% smaller than at the start of 2020, with the unemployment rate around a percentage point higher.”

Moving to the RICS reporting, things are starting to look a little pessimistic, “A net balance of -28% of respondents reported a decline in new buyer enquiries over the month. This latest return brings to an end a run of seven consecutive positive monthly readings beforehand, and is consistent with a noticeable drop off in demand.”

RICS also reported a decline in the number of listings being brought onto the market, with a net balance of -38% of respondents noting a decline.

Agreed sales also took a downward turn with a national net balance of -18% of respondents citing a fall (+15% in December). Looking at the regional breakdown, East Midlands, South West and Yorkshire & the Humber all returned negative net balance readings.

With that said, +50% of survey participants noted an increase in house prices although slightly down on +63% posted in November and December. Looking forward “a net balance of +30% of respondents anticipate prices will increase over the year to come (up slightly from a figure of +24% beforehand). All UK regions/countries are expected to see prices rise to some degree in the next twelve months, with Wales, Northern Ireland and Scotland all exhibiting especially strong projections.”

Interestingly, Hometrack reported house prices rose by 0.3% in January. The annual rate of growth was recorded at 4.3% – the highest growth rate since April 2017. Manchester and Liverpool register the strongest price growth with an annual growth of 6.3% and 6.8%.

Demand remains high as the ‘search for space’ continues. However, the number of properties being listed are not able to keep up with demand and therefore is creating upward pressure on house prices.

Hometrack identifies signs of increasing activity among first-time buyers. This relates to the increased selection of mortgages available for those with only a 5% or 10% deposit. And as more first-time buyers enter the market it is only more likely to widen the mismatch between supply and demand as first-time buyers do not have a property to list for sale.

Finally, within the Rightmove reporting, the average price coming to market rises by 0.5% (+£1,522) in February. Rightmove states ‘This is being fuelled by both a shortage of supply with fewer new sellers coming to market and increased demand, with all our indicators of buyer activity being ahead of the same period last year.’

Click here to download the full report.