ARK’s Market Synopsis

COMMENTARY

Welcome to the latest edition of ARK’s market synopsis report covering market outcomes to the end of December 2020 and with Rightmove picking up reporting for January 2021.

The year ended with Halifax reporting the annual house price in December 2020 standing at 6.0% (+7.6% in November 2020). Annual house price growth rose to a six-year high of 7.3% (-6.5% in November 2020) in Nationwide’s reporting.

But there are headwinds likely to affect the market later in 2021, Halifax say “In the near-term, and with mortgage approvals still sitting at a 13-year high, there may be enough residual strength in the market to sustain prices up to the deadline for the stamp duty holiday and the scaling back of Help to Buy at the end of March. However, with the pace of the UK’s economic recovery expected to be constrained by the renewed national lockdown, and unemployment widely predicted to rise in the coming months, downward pressure on house prices remains likely as we move through 2021”.

The RICS is reporting indicators starting to soften, and Nationwide say “housing market activity is likely to slow in the coming quarters, perhaps sharply, if the labour market weakens as most analysts expect, especially once the stamp duty holiday expires at the end of March”.

The rule looking forward and beyond March seems to be to apply a prudent approach to pricing and sales rates.

We have previously said how the pandemic has bucked our expectations and that there are strong drivers underpinning demand; the “race for space” and the “drive to the countryside” may continue to be positive factors going forward coupled with the still significant under production of new homes creating demand.


HIGHLIGHTS

In the RICS reporting key indicators are starting to soften, “In terms of new buyer demand, a headline net balance of +15% of survey participants saw an increase in enquiries during December. Although still positive and therefore indicative of some degree of uplift in demand, this latest reading is down from +26% last time out and has now moderated in five successive reports.” Adding to this agreed sales was pencilled in at a net balance reading of +18% in December, compared with +24% previously.

RICS also reports house price inflation remained high across most parts of the UK which is putting upward pressure on house prices. “the national net balance has now remained in a tight range of between +61% and +65% in each of the last four months.”

Like other sources, RICS also anticipated a loss of momentum in the near-term outlook. With that said the 12-month outlook looks to portray a more positive picture with a net balance of +24% of respondents anticipating national house prices to be higher in a year’s time.

Moving to Hometrack, house price growth is at 4.3% in December 2020, the highest since April 2017. Annual house price inflation is highest in Wales and North West which is at +5.4%. Regionally, house price growth is at a decade high across the North East, North West and Yorkshire and the Humber – highest since before the global financial crisis.

Hometrack also mentions the flow of new supply onto the market is down 12% than this time last year (Dec-2019). However, London is the one area where supply is growing with flats accounting for much of this increase. Hometrack believe “this is a combination of 1) more owners looking to trade up from flats to houses motivated by a desire for space and more flexible working patterns; 2) investors looking to sell homes in the face of falling rents and expectations of an increase in capital gains tax rates in 2021.”

Furthermore, a lack of new listings, together with rising demand and more new sales being agreed will reduce the availability of homes for sale. In the near term, this will keep an upward pressure on house price growth, especially if demand remains in line with or ahead of last year.

Looking at reporting for January 2021, Rightmove reports the average price of property coming to market falls by 0.9% (-£2,887). Buyer activity has continued to exceed the same period a year ago, despite being uplifted by the post-election ‘Boris bounce’.

The Rightmove analysis shows that it is taking 126 days from the time an offer is accepted until legal completion. There are 613,000 who are already in the sales agreed pipeline and around 100,000 of those will miss out on their stamp duty saving.

Click here to download the full report.