Fuelled by the surge in demand…..
Fuelled by the surge in demand for more spacious homes during the pandemic, UK housing market activity has been exceptionally strong since mid-2020.
Recent HMRC figures show that more 1.5m homes were purchased during the past 12 months. This represents the strongest annual total since 2008, and more than one-third higher than the 1.1m yearly average recorded over the previous decade.
Accompanying this pick-up in activity, the official measure of UK house prices has risen by 17% since May 2020, equivalent to £37,000, and now stands at £268,000. This has led the ratio of house prices to earnings across the country to reach an all-time high, with the multiple currently at more than 7.5.
Notwithstanding the Bank of England’s recent decision to increase interest rates and the prospect of further incremental rises this year, house price expectations are consistent with continued growth over the coming 12 months.
A net balance of 66% of respondents to the latest RICS UK Residential Market Survey anticipate prices climbing higher over the year ahead, well above the long-run average of +29%.
Demand for purchases appears to be somewhat less exuberant following the removal of stamp duty concessions in September. Although the latest survey evidence suggests buyer enquiries remain high, the year ahead is likely to see some moderation in sales volumes and house price growth after such a strong performance in 2021.
However, supply shortages are set to remain a dominant influence on house prices even if demand tapers off slightly. Data from Zoopla illustrates the scale of the shortfall, with the stock of homes for sale estimated to be down 33% in a year-on-year comparison.
Moreover, the flow of new supply becoming available has weakened by 10% on the same basis, in line with RICS survey data that shows a fall in new listings across each of the past eight months. Bringing all these variables together, it would not be surprising if house price inflation came in at somewhere between 3% and 5% in 2022.
‘RICS survey feedback indicates that tenant demand has risen sharply in each of the past three quarters, as the breadth of growth has outstripped any comparable period since 2008 in net balance terms’
Copy sourced from RIC’s https://www.rics.org/uk/