The rise followed a 4.2% increase in 2020, taking the average house price to £242,000.
However, due to the demand for greater outdoor space, there remains a large locational disparity in growth with Wales continuing to lead with the highest price growth at 11.3%, while London registers price growth of 2.6%.
Liverpool and Manchester lead the way in terms of price growth in the UK’s largest cities, at 10.7% and 8.7%, contributing to average growth of 9.2% in the North West. Oldham and Rochdale are also registering a growth of more than 11%.
At the other end of the scale, London’s home values are up by an average of 2.6%, although in a third of the city’s boroughs including Bromley, Bexley and Havering, price growth is over 4%.
Demand rises for all property types
Several factors combined in 2021 to drive demand for family homes. The pandemic ‘search for space’, the stamp duty holiday – where larger savings were available for higher value transactions, and also changing working patterns for office-based workers all contributed to a strong focus on family homes, especially in the wider commuter zones and in rural areas.
Buyer demand bounced back strongly at the start of this year, up 50% compared to usual levels for this time of year. Some of the strongest demand has been seen in cities and wider suburbs, including Thurrock in Essex, the suburbs of Birmingham and Glasgow and East London (Barking & Dagenham) leading the way.
The flats markets outside London has been driven by the re-opening of offices, as well as more buyers considering the value in flats, with average flat prices up just 1.9% over the last year across the UK’s 20 major cities. In contrast, the average value of a detached family home in these cities is up 8%. Agents have also reported increased interest from investors and homebuyers from overseas signalling some pent-up demand coming back.
The London market is particularly driven by international demand, so the increasing ease of global travel have spurred those purchasing as an investment and those buying to live. Average demand for London apartments at the highest level since April 2020. The average value of a flat in London has remained largely unchanged over the last 12 months, while the average price of a semi-detached house has risen by 6%, signalling value in the flats market.
Supply levels starting to turn
The lack of supply of homes for sale coming to the market has been a major theme of the housing market since the pandemic started.
The sheer level of activity, with 1.5 million sales in 2021 – the highest number of transactions in any year since before the financial crisis, has eroded supply. In addition, increased activity amongst first-time buyers, who were offered a way into the market due to higher LTVs last year, and also investors, who were taking advantage of the stamp duty holiday, meant that there was more ‘pure demand’ in the market.
There is still a significant imbalance between supply and demand. Looking at stock levels against a five-year average, they are -44% lower. However, this marks a slight turnaround from late in 2021, when stock levels were down -47%.
This is a relatively small change, but new supply coming to the market is tracking usual levels at this time of year, and valuation leads have jumped in the first few weeks of the year, signalling that supply levels could start to build this year, especially as the busy New Year period passes.
It is worth noting, however, that sales agreed are also tracking usual levels, signalling that even with lower levels of stock, the number of committed buyers and sellers is allowing activity to progress, especially where agents are helping to identify properties for would-be sellers to move into.
While demand continues to outstrip the supply, there is now more balance by type of home, with three-bed houses topping both charts. In the previous four-week period, the most listed properties were 2-bed flats, at odds with the largest demand still being family houses.
Gráinne Gilmore, Head of Research at Zoopla, comments: “The pandemic ‘search for space’ continues, pushing demand for houses to record highs. Demand is also rising sharply for flats, with international demand, relative affordability and workers flowing back into cities all combining to energise this market”
Guy Gittins, CEO of Chestertons, comments: “We expect the market to remain buoyant for at least the first quarter of 2022 as London is seeing the return of office workers, international students as well as Londoners who left the capital during the peak of the pandemic but are now seeking a return to the hustle and bustle of the city.”
Nick Leeming, Chairman at Jackson-Stops, said: “The end of 2021 was characterised by a countryside renaissance that showed no signs of abating, with demand primarily driven by a race for space which surpassed all expectations at the beginning of the year. However, as today's results show, demand hasn't only been limited to those seeking more space in rural locations. Demand is also rising across our cities as people once again return to offices and seek out cultural and social amenities including access to theatres, restaurants and museums.
"In London, we have noted an uptick in homeowners who moved out to the countryside at the start of the pandemic, but who missed the city and have now returned. To put that in perspective, one of our London branches sold 21% more properties in 2021 than the previous year - with popularity across the spectrum, from classic pied-a-terre apartments to large family homes.
"Whilst current demand continues to outstrip supply, we are also seeing the traditionally reduced supply levels over these quieter months of the year. As the weather warms up and with continued low-interest rates, we expect to see interest amongst buyers rise as the nation continues its well-worn love affair with owning a home. Speaking to agents now with a view to listing in coming weeks will put vendors in the best possible position to capitalise on a buoyant market."