This timely dip, apparent in all regions, will be reassuring for most property market observers. A sense of caution on the part of vendors in setting the asking price is an indication that the market has not overheated, and thereby reduces the chance of larger corrections in 2021. As in any market, seasonal dips and corrections are vital in rebalancing supply and demand.
News of the first COVID vaccine rollout is welcome and buoys hopes for a wider economic recovery. Indeed, in the wake of the devastating lockdown measures imposed to control the virus, there is a clear sense of urgency in the need to reanimate the worst-affected business sectors. The Stamp Duty holiday has certainly boosted property market sales but, alongside that, we are witnessing a refocusing of demand from urban dwelling to more leafy suburbs and the countryside.
In fact, this new trend has created phenomenal upward pricing in corresponding locations and home types, more than matching the surge in supply in most regions. The market restart following the UK's first lockdown gave rise to remarkable regional price growth, especially in the north (Yorkshire prices are ending the year up nearly 10%). Outside of central London (and other heavily urban city centres), the property market looks to be sailing into calmer waters as we head into 2021.
On the downside, the desirability of central London's bricks and mortar has taken a severe tumble in the wake of the first COVID lockdown. Consequently, most urban locations are now experiencing a period of price rediscovery. Demand in more central parts of London has failed to keep up with supply in both the sales and rental markets over recent months.
This certainly bodes ill for the capital region in 2021 as, while rents are collapsing in many boroughs, residential property is looking increasingly overpriced despite the price falls already observed. The typical price of a flat within a ten-mile radius of the centre of London has fallen 5% over the last year and, with rents falling more than 20% in central boroughs, we expect further price falls in 2021.
The fact that the market overall shows such vigour and significant price growth as we come to the end of what is one of the most economically devastating years in history is both encouraging and reassuring. In short, 2020 could have been a lot worse. Moreover, the current overall health of the property market is a testament to the hard work and determination of thousands of actors in the industry. Their sterling efforts in the most trying of circumstances have got the market back on its feet. As we look forward to 2021, we expect to see the market continue to adapt to the new pattern of buyer and renter demand.
The annualised mix-adjusted average price growth across England and Wales is currently a most remarkable +4.7%; in December 2019, the annualised rate of increase of home prices was -0.3%.
