Pent-up demand and changing priorities resulted in a housing market that exceeded all expectations last year. As the UK begins to embrace something like life as we once knew it, how is the market reacting in 2021?
Will supply catch up with demand?
So far this year the overriding characteristic of the market outside London is a lack of stock while in the capital there have been higher levels of supply than usual.
Our experience is that prime property in the regions is selling almost as quickly as it becomes available, with demand leading to annual price growth of more than 5 per cent (prime being the top 5-10 per cent of the market in any given area). It’s something of a catch-22: some people are telling me they don’t want to sell yet because there’s little choice in what they can buy.
But stock is coming – the vaccine rollout and a renewed sense of optimism means those potential sellers who postponed plans to move feel much more comfortable and confident about doing so now. As the year goes on, we expect supply and demand will gradually become more balanced and so the rate of price growth may slow.
Has the market peaked?
The evidence we are seeing now says no. Demand levels from new buyers continue to exceed analysts’ expectations. It looks like there is still room for more growth in the prime markets around the UK and particularly in prime central London where the market is now gaining significant momentum even before international travel corridors reopen.
While the end of the stamp duty holiday in England will have an impact on mainstream sales, we don’t expect it to be a significant factor for prime property.
How much are buyers prepared to pay?
In April 2021, the properties we sold in England and Wales achieved an average of 100 per cent of the guide price, something we’ve not seen for many years. So while some buyers may have paid a little less, many will have been prepared to pay more. In Scotland, with its ‘offers over’ system, we are currently looking at anything from 5 per cent above to as much as 25 per cent for the rarest gems.
Buyers hoping to be successful with a low offer on something just out of their price range are likely to be disappointed, particularly if they’re not in a position to move quickly. Having said that, the sky is not the limit for sellers. Accurate pricing is paramount – ask too much and the property may stick on the market. Failing to sell and reducing the price in the current market can be detrimental, creating the perception that there is a problem. All this underlines the importance of choosing an agent with in-depth local knowledge of how the market is performing in real time.
Green fields or city streets?
The move to live alongside green fields, lochs and glens was well documented in 2020 as many buyers yearned for more space and a home closer to nature. This lifestyle appeal hasn’t waned but 2021 is also proving to be the year of the regional city.
Equally driven by the experience of the pandemic, Edinburgh, Glasgow, York, Manchester, Bristol and Bath in particular are seeing exceptionally strong demand from London buyers moving back to be close to family, their roots and support networks. Not everyone wants a country life – for some the urban vibe and associated amenities are more important and regional cities represent good value for money compared to London prices.
Will international travel bring a second wind?
As lockdown headwinds ease for international travel, the return of overseas buyers will have an impact this year, especially in the capital. One of the remarkable features of the housing market over the past 12 months is that it has been fueled almost exclusively by domestic demand and those buyers have been very active in recent months, seemingly calling the bottom of the market particularly in prime central London. That is about to change and will accelerate the recovery in the UK capital.
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