The tapering of the stamp duty deadline seems to have had little effect on the levels of demand currently being seen in the property market. Rightmove reports that they have seen their busiest first half of a year ever recorded, with buyer demand pushing the average price of property coming to market to a new record high for the fourth consecutive month, and £21,389 higher in just six months.
According to data released this morning by the portal, the new all-time high of £338,447 is due to a monthly rise of 0.7% (+£2,374). This is the largest monthly rise at this time of year since July 2007. Rightmove analysis has identified a shortfall of 225,000 homes for sale which, if available, would have helped to maintain a more normal level of property stock for sale and would have helped stabilise prices.
This stark shortfall, along with frenzied buyer activity, is fuelling record high prices and leading to record lows in available stock for sale. With high activity levels continuing despite the June stamp duty deadline now passing, there is an urgent need for these low stocks of property for sale to be rebuilt in order for price stability to return.
Tim Bannister, Rightmove’s Director of Property Data, comments: “We predict that the number of completed sales will be the highest ever seen in a single month when June’s data is released by HMRC later this week. This means it’s likely that the first half of 2021 has seen a record number of moves when compared with the first six months of any other year, induced by the pandemic’s side-effect of a new focus on what one’s home needs to provide.
"That is one of the driving forces behind four consecutive months of new record average property prices. Demand has also been boosted by the ongoing creation of new households, and property being seen as an asset to hold, with historically low returns from many other forms of investment. New stamp duty deadlines in England and Wales for sales completed by the end of June have also helped to exhaust the stock of property for sale and concentrate activity. This has left prospective purchasers with the lowest choice of homes for sale that we’ve ever recorded, continuing price rises, and stretched affordability.”
Rightmove expects that the number of sales completed in the first six months of the year and due to be reported by HMRC later this week is on course to be around 800,000, which could just beat the previous record of 795,000 set in 2007. The 2007 record was set under very different circumstances, at a time when mortgage lending criteria were much less stringent than in today’s more controlled market. The analysis shows that the shortfall of 225,000 homes for sale comes from 140,000 more sales being agreed and 85,000 fewer new listings than the long-term (2014-2019) average for the first half of a year.
The net result of this major imbalance between supply and demand is that the average number of available properties for sale per estate agency branch is at a new record low of 16 properties, compared with the previous low before 2021 of 25 properties and a longer-term average for this time of year of 31.
The boom in sales demand and consequent greatest ever imbalance with supply have been most notable in the more expensive sectors of the market. Rightmove’s “top of the ladder“ sector mainly includes homes that are detached with four bedrooms or more. These have seen a surge of 39% in the number of sales being agreed, and a drop of 15% in the number coming to market when compared to the first six months of 2019. This massive swing has seen average prices for this sector up by 6.7% in the last six months.
Rightmove’s “second-stepper” category, mainly made up of three-bedroom homes, have also seen a marked swing, with 29% more sales agreed and a fall in new listing numbers of 10%. Heady price rises averaging 6.9% over the first half of the year are the result. On a slightly more positive note, hard-pressed first-time buyers will find that their typical sector of two bedrooms and fewer has virtually the same supply as in 2019, down just 1%. Their sales agreed numbers are also less buoyant, though still 26% up on the same period in 2019. The stock shortage is, therefore, less acute, and with prices up by a more modest 3.4%, this could be a relative buying opportunity for those looking to get onto the property ladder.
Bannister adds: “First-time buyers are currently benefitting from their sector having the most buyer-friendly conditions. Choice is still more limited when compared to the same period in 2019, but price rises are the most subdued of any sector. Saving a deposit is still very hard, but 5% is now an option, and with many paying rising rents, buying your own home on a lower deposit is becoming an opportunity again. The opportunity is also there for property owners to come to market, as it’s still a great sellers’ market despite the recent end of the tax holiday in Wales and its scaling back in England.
He concludes: "We’ve also seen a much more efficient housing market over the past year, with the strong buyer demand and faster churn of homes leading to a much higher percentage of sellers finding a buyer for their home, and fewer unsold homes being withdrawn from the market. Buyer sentiment remains strong, and the growth in new households combined with people living longer and having changed housing needs is exacerbating long-term housing stock shortages.”
Marc von Grundherr, Director of Benham and Reeves, said: “The UK property market continues to defy expectation, with house prices reaching yet another record high despite whispers of a decline in values as a result of the tapered stamp duty holiday deadline. There’s no doubt the stamp duty holiday has been the catalyst for this impressive market performance. However, it isn’t the driving factor behind the intent to purchase for UK homebuyers and so a robust level of activity will remain long after it has expired. When you couple heightened demand with a severe shortage of stock, it’s very likely that property values will remain buoyant for the remainder of the year, at the very least.”