The housing market has been one of the few certain things in life since the Covid-19 pandemic began. In a world where everything suddenly seemed in flux, UK property has been solid and resilient, outperforming all growth predictions and proving versatile enough to beat all the challenges which arose.
We are now past the halfway point of 2021 and it has become clearer than ever before that the future of the property market continues to be bright. The so-called ‘residential restart’ is well underway and there are opportunities for home buyers and property investors alike.
Read on for our summary of the current state of the market, how the pandemic has changed the market and what to expect in the future.
What is the current demand for property in the UK?
Put simply, demand for property in the UK is higher than it has been for many years. New data from HMRC show that 213,120 sales were registered in June 2021 alone, making it the busiest month since the figure was first recorded in 2005.
When the figures are added those seen in April and May, we can see more than 428,000 sales in Q2 2021. This is an extremely high number and shows that the strength of demand is more than a one off monthly phenomenon – this level of activity is now a trend.
Analysis of the numbers shows that a number of factors have contributed to this situation. The most obvious is that the lockdown period led to a certain amount of previously restrained demand – now that the market is back open, many are buying at the same time.
However, the fact that this is an ongoing pattern emphasises the underlying strength of the housing market as a whole. Even though there is pent up demand from lockdown, there was never a real slowdown in the market. The resilience of house prices and the undersupply of properties created a foundation which the post-lockdown demand has been built on. This is particularly the case in city centre luxury markets where apartments cannot be built fast enough.
What are house prices like currently?
The effect of this remarkable growth in demand is that house prices are growing extremely strongly. The latest figures from the Royal Institution of Chartered Surveyors (RICS) demonstrates how the strong demand is pushing house prices higher.
RICS notes that 75% of respondents to their Residential Market Survey, 75% noted an increase in headline prices for property in the UK. Additionally, new buyer demand was reported to have risen across every region of the UK for the first time.
Simon Rubinsohn, RICS Chief Economist, said: “Housing supply, or more pertinently, the shortfall in supply relative to demand is the key theme coming through loud and clear from respondents to the latest RICS survey. While it may be simplistic to assume that higher numbers alone can redress the affordability issue particularly in a low interest rate environment, an uplift in delivery does have a role to play.”
At present there is no indication that this shortfall between supply and demand can be met, and until it is, we are likely to see prices increasing. This is borne out by the latest Hometrack Cities Index which shows annual national house price inflation running at 4.7% - the highest level since 2017, long before the Covid-19 pandemic began. Certain cities, including Manchester (7.2%), are leaping far ahead of the rest of the country, making them the ideal place for property investors to look for the highest returns.
The Rightmove House Price Index also confirms how strong demand is affecting house prices. According to the latest Index, buyers are now faced with new record high house prices in every region of the UK except London which continues to lag behind. The level of new properties coming to market is roughly the same as ever, but demand is through the roof.
Tim Bannister, Rightmove’s Director of Property Data comments: “Last year’s unexpected mini-boom is rolling on into 2021, with new price and market activity records again defying many predictions. Buyer affordability is increasingly stretched, but there’s obviously some elasticity left to stretch a bit more as many buyers are squeezing their way into higher price bands. This high demand, with both willingness and ability to pay more, has pushed the average price of property coming to market to a new all-time high of a third of a million pounds.
“In another twist, it is the regions of Britain further north that are leading the way, with some degree of catching up between average prices in London and the north. While the gap remains very large, with average prices in London still 2.9 times higher than those in the north, this ratio is now at its smallest since 2013,” Bannister added.
What to expect in the future?
While the future can never be known completely, the housing market is one area where confident predictions can be made – and every indication shows that house prices will continue to rise. This is especially case in Northern city centres like Manchester and Preston where it seems that supply can never keep up with the demands of growing populations and booming economies. This has repercussions for homebuyers and investors who may wish to buy now rather than wait and pay more in the future.
Manchester is an interesting case in point when it comes to supply and demand. While it is true that a large number of new homes are being built in the city – including many eye-catching tall towers – its population is increasing even more quickly.
The Office for National Statistics believes that the city’s population growth is double the national UK average, and the Manchester City Council Forecasting Model shows that the city’s population will reach 627,000 by 2025 – an increase of approximately 70,000 people. Conversely, the Deloitte Manchester Crane Survey 2021 predicts that only 6,000 homes will be completed in the city by the end of 2021.
To say there is an opportunity to take advantage of rising house prices here is something of an understatement. Ronald Garrett, Managing Director of Alliance Investments, believes this is the perfect time for UK property investment in Manchester, saying: “The market is booming in a way that has taken many by surprise, but those with knowledge of the Manchester market knew that the current growth in house prices was inevitable.
“The population of Manchester is growing so fast that developers cannot keep up, and population estimates from the City Council show that this will be the case for many years to come. This means that property values in the city will continue to grow, especially in the luxury city centre market that is so attractive to young professional renters. This is the ideal time to purchase residential property in Manchester and make the most of the upcoming gains.”
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