08th January 2021
Annual UK house price inflation +3.9%
The annual rate of UK house price growth has moved higher to +3.9% in November up from +1.3% a year ago. The 3-month growth rate peaked at 2% in September and has slowed, suggesting annual growth will start to plateau at c.5% in 2021 Q1.
The impetus for house price growth is coming from northern England and Wales where affordability remains less of a barrier to price growth. Average prices in the North West are increasing at 5% and at a city level, Manchester is registering growth of 5.7% followed by Leeds, Nottingham and Liverpool all recording growth over 5% per annum.
Demand for housing 40% higher over 2020 than 2019
Market conditions remained strong as we approached the festive period; although demand has slowed since the summer yet remains 33% higher than a year ago when the General Election impacted levels of activity.
Over the whole of 2020 the demand for housing increased by 40% compared to 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.
South of England leads the recovery in new sales
New sales agreed continue to run ahead of last year by over 40%, in line with above average demand. During 2020 9% more new sales agreed in 2020 compared to 2019. These sales will convert into completions after circa 3-4 months so a proportion of these new sales will not complete until 2021. The rebound in sales has been strongest in the South East and Eastern regions where they are more than 20% higher than 2019.
Value of sales agreed in 2020 is 26% higher than 2019
A combination of more sales at higher prices means the total value of residential property that has changed hands in 2020 is 26% higher than last year. This equates to an additional £62bn of sales which takes the annual total value to over £300bn.
This will significantly boost estate agency revenues and explains why the value of mortgage approvals for home purchase in October is 68% higher than a year ago (reflecting sales agreed 2-3 months prior, in the peak of the rebound).
Strong start to 2021 Q1
As households look to the future, and with no immediate end in sight to restrictions, a proportion will continue to re-assess their housing priorities.
Stamp duty is a factor supporting demand, but we have questioned the scale of the importance. A recent consumer survey by 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.
We expect a seasonally strong start to 2021 with older, equity rich, long-time owning households continuing to take a growing share of sales. Improved availability of higher loan to value mortgages for those with deposits of 10% or more are already increasing which will support first time buyers in 2021.
House Price Index – Country, region and city summary
The latest House Price Index from November indicates that Manchester witness the highest annual house price growth at 5.7%, followed by Leeds at 5.6%, and Nottingham at 5.4% to round up the top three highest performing UK Cities. House prices in capital only increase by 2.8% YoY, with the average price of a house in London costing £485,100.
At a regional level, house prices in the North West have increased by 5% YoY, similar YoY growth was also witnessed in Yorkshire and Humber where house prices increase by 4.9%. The West Midlands including Birmingham had a YoY house price growth of 4.0% and the Greater London region house prices increased by 3.0% YoY.
Original content taken from Zoopla’s UK cities house price index report, November 2020