ARK’s Market Synopsis

By Chris Seeley · 12 January 2021

Welcome to the latest edition of ARK’s Market Synopsis. As regular readers know the report lags behind the month in which the report is published, and this report covers market outcomes to the end of November with only Rightmove picking up reporting for December.

Commentary

No one is yet reporting the latest impacts of lockdown across the UK, but with estate agents, at least in England, able to stay open and removal firms able to operate there seems to be an acknowledgement of the importance of maintaining a buoyant housing market.

And buoyant it currently is, with all parties showing positive activity up to the point of their reports. Hometrack provides this explanation for continuing house price growth “over the whole of 2020 we have recorded 40% more demand for housing than in 2019. The flow of new supply onto the market has been 4% higher than 2019 and this supply/demand mismatch explains why house price growth is increasing.”

In this commentary, we are looking beyond the data to the outlook for the market and emerging trends. We have previously reported on the themes of “a race for space” and the drive to the countryside and there is growing evidence of these two themes becoming driving factors in the market.

Halifax reports “the current market continues to be shaped by a desire for more space, the move from urban to rural locations and indications of a trend for more home working in the future.”

Hometrack are more explicitly saying “The search for space has been a key feature of the rebound in market activity as households re-evaluate their housing requirements. Demand for family housing with gardens, parking and extra space to work from home has continued to rise. For those looking to buy flats, buyers are prioritizing homes with private outside space but not all homes can meet this requirement which is then reflected in pricing levels and the time to sell.”

They go on to say, “Segmenting house price index by property type shows that the search for space is having an impact on price inflation with houses recording annual price inflation 2x that for flats.”

Zoopla found that “44% of movers’ plans were not influenced by the stamp duty holiday -they remain focused on the need to relocate and find more space and a better location.”

What this emerging evidence tells readers is that we all need to pay particular attention to the internal design and external spaces, as well as private and communal spaces across our new schemes.

We need to very carefully consider how many and what type of flats we build and pay particular attention to outdoor spaces on these schemes. There is a real challenge for those providing affordable rented homes where demand is high and customer choice more limited. It is clear what is happening in the sales market and we should reflect some of that thinking in the provision of affordable homes.

The market has bucked the initial expectations of commentators, including the writer, and performed well in excess of expectations during 2020, one cannot help though comment that this will probably not be the case in 2021 and we draw readers attention to the following comments:

• Halifax say “a slowdown in housing market activity is likely over the next 12 months.” They go on to say “perhaps sharply if the labour market weakens as most analysts expect, especially once the stamp duty holiday expires at the end of March.”
• Nationwide say “The outlook remains highly uncertain and will depend heavily on how the pandemic and the measures to contain it evolve as well as the efficacy of policy measures implemented to limit the damage to the wider economy.”
• Hometrack reports that “the housing market is not immune to economic forces and rising unemployment. Economic pressures are already impacting in parts of the market, reducing the volume and share of sales in less wealthy areas.”
• However, Rightmove are a little more upbeat by saying “The unexpected market momentum of 2020 overcame the unknowns of the pandemic and associated economic fallout, and though headwinds and uncertainties remain, demand for housing and buyer affordability appear to be strong enough to outweigh some of these dampening effects.”

We are suggesting that readers should not rely on further significant house price growth, one should expect longer sales periods for completions from next summer. Shared ownership sales may be affected more by unemployment with many of our customers in roles disproportionately affected by the pandemic.

There are some early signs that this latest lockdown has had a greater impact on the public psyche despite the good news regarding the roll-out of the vaccine. As we have often said the market is driven by sentiment, so we advise keeping an eye on how positive people are feeling.

Highlights

In November, Halifax reported an increase in house prices by more than 1%. The average property price currently stands at just over £253,000, which has risen by more than £15,000 (6.5%) – strongest five-monthly gain since 2004. Halifax further adds “properties sold to home-movers recorded a much higher rate of annual house price inflation (+7.9%) than first-time buyers (+5.8%).”

Meanwhile, Nationwide reported an increase in annual house price to 6.5% in November – highest since January 2015.

Looking at the RICS reporting a headline net balance of +25% of survey participants saw an increase in agreed sales over the month. Wales and Northern Ireland are still seeing particularly strong growth. However, the West Midlands, East Midlands and Scotland have begun to see a flatter trend emerge.

Reporting from Hometrack shows the annual rate of UK house price growth increasing to +3.9% in November. Momentum for house price growth is coming in from northern England and Wales. Hometrack expects house price growth to slow to +1% by the end of 2021.

Rightmove forecasts a robust 4% national average house price growth in 2021. It further mentions that prices will rise at a slower pace than 2020, which finished up by 6.6% despite a small monthly fall of 0.6% (- £2,080).

The new year has seen COVID cases rise to a new high, to help reduce the spread of the virus the government announced a new lockdown. During the lockdown, we have seen how the pandemic has affected the wellbeing of people. We are all facing challenges in terms of health, work and home life. The ARK Academy has developed a range of remote workshops and seminars to support mental health awareness and resilience. To find out more click here.

To download the full report, click here.