ARK’s Market Synopsis
Welcome to the latest edition of ARK’s market synopsis report covering market outcomes to the end of March and with Rightmove picking up reporting for April.
The four themes from our recent reporting continue to be evident:
- No immediate cooling in the market
- Caution regarding the outlook
- The continued drive to the countryside
- The race for space.
The reports point to ongoing increases in house prices, Halifax up 1.1% since February, Nationwide 5.7% month on month annual growth and Hometrack at 4% annual growth.
Halifax report that the average property is now worth £254,606, a new record high. Others report different averages but all show record highs.
So far so buoyant; but, readers must be concerned about the affordability of new homes. According to Halifax “March’s data shows that house prices rose by 6.5% annually, or £15,430 in cash terms”. The only real beneficiaries of such growth are downsizers! First Time Buyers are far worse off with homes consuming more of their income and affordability falling as salary inflation fails to keep up with house price inflation. Savings from stamp duty are being consumed in house price rises.
The next theme relates to caution with the Halifax saying “with the economy yet to feel the full effect of its biggest recession in more than 300 years, we remain cautious about the longer-term outlook. Given current levels of uncertainty and the potential for higher unemployment, we still expect house price growth to slow somewhat by the end of this year”
Nationwide are similarly cautious reporting – ”if the labour market weakens towards the end of the year as policy support is withdrawn, as most analysts expect, then activity is likely to slow nearer the end of 2021, perhaps sharply.”
The continued drive to the countryside is supported by figures from Nationwide; “Northern Ireland saw the highest growth of the home nations, with a 7.4% increase. Meanwhile, Wales and Scotland both saw an acceleration in annual price growth to 7.2% and 6.9% respectively”.
Nationwide go on to say “The North West was the strongest performing region, with prices up 8.2% year-on-year. This is the strongest price growth seen in the region since 2005 and average prices reached a record high of £181,999. There was also a further pick up in price growth in the neighbouring North, which saw a 7.2% annual increase.
What we term the Race for Space Hometrack call the “continued search for space” among homeowners and refer to that as an ongoing market driver. Halifax say “buyer demand is still fueled by a desire for larger properties and more outdoor space.”
On a monthly basis, Halifax recorded an increase in house prices of 1.1% when compared to February. The rise in market activity comes from the Government’s announcement to extend the stamp duty holiday and the introduction of the mortgage guarantee scheme.
In upcoming months Halifax is expected to see higher levels of market activity to be maintained as customer confidence is gained due to the vaccine roll out and the search for space continues for buyers.
Halifax goes on to mentions “However, with the economy yet to feel the full effect of its biggest recession in more than 300 years, we remain cautious about the longer-term outlook. Given current levels of uncertainty and the potential for higher unemployment, we still expect house price growth to slow somewhat by the end of this year.”
In the Nationwide reporting annual house price slowed down to 5.7% and month-on-month house prices saw a fall by 0.2% from February’s readings after taking into account seasonal effects. UK annual houses remain similar to Q4 last year, however when broken down into regions the picture looks a little different. North West saw the strongest growth, with an 8.2% increase. Conversely, London was the weakest performing region with annual price growth at 4.8%.
RICS reports a net balance of +59% respondent stated an increase in house prices. With the increase in demand over supply it is expected for house prices to continue towards an upward slope. Agreed sales and new buyer enquires also rose during March with contributors citing a net balance of +50% and +42% respectively.
Hometrack marks in annual house price growth at 4.0%. At city level, Manchester (6.5%) and Liverpool (6.3%) saw strongest annual house price growth. The weakest performing city is Aberdeen where prices are down -1.7%. Cities that indicate the largest demand levels in Q1 were Birmingham, Swansea, Glasgow, Liverpool and Leicester, where average house prices are under £200k.
Like RICS, Hometrack also mentions the demand/supply mismatch: “The number of homes being listed for sale has not kept pace with buyer demand foremost of the last 12 months, eroding the total number of homes for sale in most markets, with a particular drop in the availability of family houses.”
In upcoming months Hometrack is expected to see price growth slowing down especially in Q3 where government support initiatives will be reduced.
Moving to Rightmove, the average price of property coming in is at a new record high of £327,797 – monthly increase of +2.1%. 30% of 2- & 3-bed semi-detached houses are being marked as sold by agents having been on the market for less than a week. This boost in market activity is driven by the mass market where few buyers will be achieving the maximum stamp duty savings. However, this momentum is likely to slow down later in the year.
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