SUMMARY

House prices slipped a marginal -0.3% in January, according to Nationwide. This follows the strong 7.3% annual price growth seen last year and is the first monthly fall since June 2020. 

This modest fall comes in the face of continued strong demand and shrinking supply, which typically drives value growth. The number of sales agreed has been higher than the number of new instructions since the end of November, according to TwentyCi. This means that homes have been selling faster than they were being listed, shrinking the level of supply relative to demand. The RICS survey for December also showed new buyer enquiries slightly above new instructions. Although the total number of surveyors seeing rising activity has continued to fall, they remained in the majority.

This all suggests that demand remains strong and January’s modest price fall may prove to be a temporary blip. But it could be an early sign of demand weakening from the robust levels of activity that have persisted since the end of lockdown 1.0. Stringent lockdown measures continued in January making it more difficult for new buyers to complete a sale before the stamp duty holiday ends on March 31st.

Parliament debated extending the holiday at the start of the month, with many MPs expressing their support. But the Government has shown no sign of changing the end date as yet.

Completed transactions rose again in December, a 14% increase on the previous month and 34% higher than December 2019 according to HMRC. However, the market did not fully recover from the impact of the shutdown earlier in the year meaning that 11% fewer sales completed in 2020 than in 2019, despite the surge of activity at the year end. We expect to see exceptionally high numbers of completions during February and March before a Q2 lull, assuming the holiday ends as currently planned. This would be supported by high numbers of mortgage approvals, which were up 61% in December 2020 compared to December 2019.

The average UK rent increased 1.4% over the year to December, according to the ONS. Rents grew the most in the South West, up 2.6%, and were weakest in Scotland and London, up 0.9% each.

Annual house price growth in October was strongest in Midlothian, at 9.1%, followed by Rossendale in Lancashire at 8.0%. House prices fell most in Aberdeen (-2.1%), followed by Rochford in Essex (-2.0%).