UK Housing Market Update - December 2021

House price growth remains strong as activity returns to more normal levels

House prices rose by 0.9% in November according to Nationwide, putting annual growth back to double digits at 10.0%. Strengthening buyer demand, as reported in the latest RICS survey, coupled with limited supply on the market will keep price growth in positive territory. 

The end of the stamp duty holiday has brought with it a dip in activity, with UK mortgage approvals in October 4% lower than the 2017-19 average for the month, according to the Bank of England. Completed transactions also dipped below their pre-pandemic average. But new sales agreed are still running at elevated levels according to TwentyCi, suggesting the year end is likely to be busier than usual. 

Numbers of new Buy to Let (BTL) mortgages have doubled over the last year, according to UK Finance, with latest data showing 13,000 BTL loans in September. Mortgaged landlords have increased their share of the market since September 2020, as have home-movers, while first-time buyers (FTBs) now account for a lower share of the market. The increased investor activity is likely to have been in competition with FTBs purchasing in the lower part of the market. The average purchase prices for FTBs and BTL investors were similar, at £250k and £220k respectively.

These new landlords are likely to benefit from increasing demand in the rental market. Tenant demand has been positive across all regions and London has experienced the most dramatic turnaround. The RICS survey reported the highest quarterly reading for London since the series began in 1999.

As a result, the average UK rent increased 4.6% over the year to September, according to Zoopla. Rents grew strongest in the South West, up 12%, and least in London, still 4% down on last year. However, the capital saw rental growth of 2% between August and September alone.

The top three local authorities for annual house price growth in August were all in Wales, with Ceredigion at 18.4% followed by Pembrokeshire and Monmouthshire at 16.4% and 16.2% respectively. Only London boroughs experienced annual house price falls, including Southwark at -3.0% and Kensington and Chelsea at -2.9%.