2021 is set to be the UK’s busiest property market in 14 years in terms of property transactions, new data revealed, with the pandemic leading to a search for homes with more space.
Zoopla’s latest house price index showed that by the end of the year, one in 16 homes will have changed hands, making it the busiest property market since 2007, even as supply remains constrained.
The high demand is boosting the rate of annual house price growth, which is tracking at 6.9%, up from 3.5% growth in October 2020 and running at a near seven year high
However, the growth marks a slight easing back from the above 7% growth recorded in August and September.
Quarterly figures also show a slowdown in the overall pace of growth - down from 2.8% in July to 1.2% in October.
After 16 months of accelerating house price inflation, the average value of a UK home is now £240,000 ($319,843) - up from £200,000 five years ago. Over the past 12 months alone, average UK prices have risen by £15,500.
This growth continues to be underpinned by the supply and demand imbalance - buyer demand is running at 28% above the five-year average, while the supply of homes being listed for sale this year has been running between 5% and 10% below the 2017 to 2019 average.
“This highlights the increased appetite for space among those purchasing homes since the start of the pandemic, with more demand for larger homes, especially in commuter zones and more rural areas, ultimately boosting average prices,” the report said.
The total stock of new homes for sale is down more than 40% on the five year average.
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The number of houses available for sale is down more than 50% compared to the average levels over the last five years.
The stock of flats for sale is also down on the five year average, but by a more moderate 15%
“New supply will start to rise at the turn of the year as households use the holiday period to make a decision around making a move,” said Grainne Gilmore, head of research at Zoopla.
She said in typical years, the highly seasonal supply of homes being listed for sale slows in the run up to Christmas, but rises sharply in the new year.
She predicts buyer demand will remain strong moving into next year, but as the market starts to normalise, there may be an increase in the proportion of activity among movers, who are active in the market as sellers as well as buyers. This could ease the constraint in supply to some extent.
Even with some interest rate rises, mortgage rates are likely to remain relatively low compared to long-run averages, and there is more room for price growth across some of the most affordable housing markets.
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