At the same time, buyer appetite continues to gather pace, again driven by the pandemic as house hunters reassess their housing needs.
The latest analysis from Zoopla has revealed that during the first weeks of 2021, the flow of new homes coming to the market for sale was 12% lower than 12 months prior, with the portal suggesting that falling case numbers and the easing of restrictions, or a return to the tier system, will unleash pent-up supply.
By contrast, buyer demand for property has rebounded after the Christmas break - growing even faster than at the start of 2020. In the period to the 17 January, demand for homes is 13%* higher than the same period a year ago when the market had started to rebound in the wake of the General Election. New sales agreed are also running 8% higher than last year.
More than a stamp duty incentive
Increased buyer appetite over 2020 H2 has been largely attributed to stamp duty relief, however, Zoopla says that it is more than the deadline motivating home movers.
While early January is typically one of the busiest times for new buyers, this year activity is compounded by the impact of the pandemic. With more time spent at home, and more pressure on homes to deliver than ever before, more homeowners have realised that their home falls short and have been galvanised to move. Rising house prices have also created more equity in people’s homes, adding further impetus - and financial ability - to move.
The strength of the sales market in 2020 H2 saw 47% more sales agreed than the same period in 2019. This absorbed a lot of available supply and means we are starting 2021 with the total number of homes available ‘for sale’ 6.4% lower than a year ago.
If sellers remain cautious and supply scarce, the choice for those in the market will be limited, which will continue to push house prices higher.
House price growth reaches decade-long highs in three regions
Despite the impact of the third lockdown on new supply, house prices have reached an almost four year high at 4.3%. The highest since April 2017, with momentum coming from regions where housing affordability is most attractive, primarily northern English regions.
At a country level, Wales is the fastest growing market with prices rising at 5.4% year on year. At a city level, Liverpool is growing fastest with house prices +6.3% higher than a year ago - its fastest rate of growth for 15 years, since before the global financial crisis. Manchester is close behind with a growth rate of +6%, returning to levels of inflation last seen two years ago.
There are three regions where house price growth is at its highest for a decade North East, North West and Yorkshire and Humber - all are registering the highest growth since 2007, with prices currently rising between 4% and 5.5% a year.
House price growth has increased in southern regions of England but affordability pressures limit the scope for above-average growth. Prices in London are +3.1% higher over the last year but this is way off the 20% annual growth rate recorded in July 2014.
The stamp duty deadline of 31st March 2021 is front and centre of housing market analysis, and with so many sales agreed in 2020 H2 and racing to beat the cut off date, this is of little surprise. More sales in the pipeline this year compared to January 2020 means the average time for a sale to complete is over the usual 3 months and closer to approaching four months - up by two weeks compared to the average year.
There is a risk that up to 70,000 sales agreed in 2020 may miss the deadline. The case is growing for a short, month-long extension to help buyers who agreed on a sale in 2020 and secure the expected savings. In a normal year, around 55% of sales agreed in January would complete by the end of the first quarter - the proportion this year is likely to be lower.
What is not clear is how many individual sales, and housing chains, are 100% dependent on securing the stamp duty savings. The more buyers rely on securing savings, the greater risk of a spike in sales falling through, with a knock-on impact for whole chains of sales. If an extension fails to materialise, buyers across some chains may help to fund stamp duty costs for others in the chain to safeguard completions.
Stamp duty holidays always cause some disruption and this one will be no different; however, Zoopla says that they do not expect the market to grind to a halt on 1 April 2021.
Richard Donnell, Research & Insight Director, Zoopla, comments: “The housing market momentum built up in 2020 H2 has rolled into early 2021, despite a spike in the pandemic and a third lockdown. Sellers are more cautious however and appear to be waiting for case numbers to drop much further before listing their home, or until we see a return to tier-based restrictions.
“The strength of the market in 2020 has eroded the available number of homes for sale and this will mean continued upward pressure on house prices in the short term. The most affordable parts of the UK are recording the highest rate of price growth for 10 years up to 5.4% a year. We still expect house price growth to slow towards 1% by the end of the year.
“The rush to beat the stamp duty deadline continues and sellers who agreed to buy a home in 2020 would reasonably expect to make the stamp duty saving. Delays mean we expect up to 70,000 sales agreed in 2020 to miss the deadline meaning the case for a short extension is growing.”