There are early signs of the UK property market beginning to lose pace due to record prices and lack of choice, according to data released this morning by Rightmove.
The portal revealed that the price of property coming to market saw an 0.8% this month, pushing the national average to a new record high for the third consecutive month to £336,073. This is a much smaller rise than last month’s 1.8% or April’s 2.1%, indicating an early sign of a slowing in the pace of the current market.
However, Rightmove highlight that it is still the largest rise at this time of year since 2015, buoyed by the strength of both the top end of the market and hotspot lifestyle change locations. This has resulted in new record highs for prices in all countries and regions of Britain, further stretching affordability for mass-market buyers whose ability to move is also affected by an unprecedented lack of choice of property to buy.
Tim Bannister, Rightmove’s Director of Property Data, comments: “Buyer demand remains very strong, though, with an all-time low in the number of properties available for sale on estate agents’ books and new stock at higher than ever average prices, there are early signs of a slowing in the frenetic pace.
"Since the market re-opened last May in England we have seen huge jumps in the numbers of sales being agreed, but these are now rising at a slower pace. Record low-interest rates and stamp duty tax reliefs have helped many to afford higher prices, satisfying their pent-up desires for a new home fit for a new era. Some of that demand has now been met, and the phasing out of stamp duty reliefs has also taken away some of the urgency to move, though our high traffic and search data indicate that there is still strong buyer demand.
"However, higher prices combined with a lack of fresh choice coming to market are reducing some buyers’ ability or desire to move, and while we expect the market to remain robust, there are early signs of a slackening in the incredible pace of activity that we’ve seen over the last year. This super-charged activity cannot go on forever, but we expect the market to remain vigorous for at least the remainder of the year.”
Buyer demand continues to outstrip supply, and the market’s size is constrained until supply picks up again. The number of sales agreed by estate agents in May was 17% ahead of the comparable period of 2019, a slackening of the pace recorded in April when sales agreed was 45% higher than in April 2019 (2019 is the best comparison year since the market was effectively suspended until mid-May 2020). The average number of properties available for sale per estate agency branch is at an all-time low of just 17, falling even further from the record low of 19 in the previous month.
This chronic shortage of choice of property to buy means that the number of sales agreed is bound to diminish unless that supply is replaced. While the number of sellers coming to market picked up in March and April, this uptick in new supply has failed to continue in recent weeks, with the number of properties coming to market now down by 17% on the comparable period in 2019.
Demand is particularly high in the top-of-the-ladder sector (typically made up of detached properties with four bedrooms or more) whose buyer wealth profile remains more insulated from the mass-market’s stretched affordability. The number of sales agreed for properties priced over £500,000, the majority of which will be in the top-of-the-ladder sector, was up by 49% in May compared to May 2019. This is despite buyers knowing they were certain to miss out on the maximum stamp duty saving that comes to an end in June.
The housing market as a whole has seen an average price rise of 7.5% since March 2020 (+£23,448), but the top-of-the-ladder sector has seen a £67,394 price rise (+12.3%). Another cash-rich segment of the market is those who are relocating from more expensive areas, and their activity is also fuelling prices in the fastest-rising regions. Prices of newly marketed properties in Wales are up by 14.6% since March 2020, the biggest rise in Britain. The second-largest price rise is in the South West, up by 11.4%.
Bannister adds: “The desire for a change of lifestyle often comes with the need for a change of location. That might be satisfied by buying a second home, or with more flexible working patterns a relocation of one’s main residence. Average prices in Wales are well below the national average, offering good value as well as beautiful rural and coastal surroundings. Buyer demand is up by 44% compared to a year ago, the highest increase of any part of Britain. The South West has been long-established as a second home hot-spot but has seen renewed impetus from main residence relocators being unshackled from the traditional locations for their daily commute.
He concludes: "This unprecedented demand has resulted in the lowest ever number of available properties per estate agency branch for any region in the country, down to just ten compared to the national average of 17. Some agents say that they’re pretty much sold out.
"It also has the fastest rate of sale in England for the first time ever, as demand from outsiders and local movers combine to make it the hottest selling region, with 28% of properties selling within a week of marketing on Rightmove. Those relocating to these more remote and lifestyle-rich locations from more expensive parts of the country have potentially bigger budgets than local purchasers, causing deteriorating local affordability.”
Jeremy Leaf, North London estate agent and a former RICS residential chairman, says: "The early signs of some market cooling in the Rightmove survey are not surprising for us. We have certainly noticed a reduction in the pace of new enquiries and an increase in selling instructions over the past few weeks, once it became clear that most transactions had little chance of meeting the stamp duty deadline.
"As a result, we are seeing more balance between supply and demand which is prompting a softening but no correction in prices so far."
Matthew Cooper, Founder & Managing Director of Yes Homebuyers, commented: “Property stock is evaporating at an alarming rate due to huge levels of buyer demand and this severe imbalance is causing an artificial property price boom. Great for sellers who can justify overpricing their home but not so great for the wider market that is already groaning under the pressure.”