ARK’s Market Synopsis

By Chris Seeley · 1 October 2021

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

The reports are generally positive, which as we know is not great news for First Time Buyers. High house price inflation really only benefits downsizers.

The positivity was generally linked to “job vacancies at a record high and consumer confidence returning to pre-pandemic levels” (Halifax) and does not take into account the potential impacts of material supply shortages, sudden shocks (petrol /gas) seen during September and the final unwinding of Furlough and a potentially wider sense of unease.

Our previous reporting of the “Race for space” and Drive to the Countryside” are again evident and reported by many of the observers and are part of the ongoing underpinning factors in the market. We think that this trend will continue as “hybrid working” becomes more commonplace.

The discrepancy in demand for houses against flats continues to be evident; Hometrack reported an increase in demand in London but the increase in demand for houses was 25% against a 6% rise in demand for flats. Space and quality standards are part of the equation but equally building safety is playing a big part in buyers decision making.

With COP26 coming soon and climate change potentially being taken seriously it is interesting to see energy performance statistics relating to house prices being reported by Nationwide.

The Nationwide report contains an analysis which looks at the extent to which owner occupiers pay a premium or discount for a home due to its energy performance rating. The report concluded that properties rated A or B attract a premium of 1.7%, compared to a similar property rated D. Most noticeable discounts were seen for properties rated F or G. For now, energy efficiency has little influence on house prices for owner occupiers, however this is likely to change over time especially if the government looks to introduce incentivisation for greater energy efficiency to help meet net zero targets.

Highlights

In August, Halifax noted average house prices increased by 0.7% and annual house price inflation continued to slow down, reaching a five-month low. The winding down of the stamp duty holiday has taken out much of its effect from the market. With that said, the race for space and homeworking continue to remain key drivers in house price inflation.

Job vacancies (which are at a record high), the recovery of customer confidence, the lack of supply and, without any reimpositions of lockdown restrictions; are factors which look to support house prices in the short term.

Nationwide noted a rise in house prices by 2.1% on a month-on-month basis, after taking into account seasonal effects. Annual house price growth increased to 11% in August from 10.5% in July.

Hometrack reported annual house price inflation at 6.1%. The average house price stood at £235,000. Regions that recorded the highest price growth were Wales (+9.8%), Northern Ireland (+8.4%) and the North West of England (+8%).

Among the UK’s major cities, Liverpool showed the highest price growth followed by  Manchester (+8.1%) and Sheffield (+7.6%).

Moving onto the RICS reporting, new buyer enquiries and agreed sales dropped for two consecutive months. New buyer enquiries fell to -14% (-9% in July) and agreed sales was recorded with a net balance of -18% of respondents seeing a fall. RICS also added “Looking at supply, new listings reported to have declined with a net balance of -37%, stock levels on estate agent books have dropped from an average of 42 homes per branch at the start of the year and now stand at 38 in August.’

A theme that we see throughout all reports is the lack of supply which looks to support house price inflation. In relation to this, RICS also noted a net balance of +73% of contributors seeing prices increase. 

The final reporting comes from Rightmove, where prices for September are coming in at a new all-time high after rising by 0.3%, the average UK property price is coming at £338,462. Rightmove further adds “That competition is hotter than ever, with buyer demand per property for sale more than double that of pre-pandemic levels.”

Areas including South West, Wales, East Midlands, East of England and South East have shown annual price growth in excess of 8%. In the first two weeks of September, the number of new listings has gone up by 14% when compared to the last two weeks of August.