Since the main lockdown started to soften, and the property market started to open up, the supply vs demand imbalance is supporting the growth seen in the property market, with first-time buyer demand taking a step back.
The average property price across the UK has seen an increase of 2.6% up 1% from a year ago. The overall market is witnessing a sales growth of 3% in comparison to last year, where this year, ten cities in the UK have seen growth on property prices of more than 3%.
Demand for properties is 39% higher than last year with more buyers coming into the market, and with the shortage of supply, property prices are set to continue to increase. This does not mean that there is an overall shortage of properties, in fact, there is 10% more inventory in comparison to last year. However, with more buyers in the market since the property market opened up after the lockdown, supply vs demand is inflating property prices.
The lag of 3-4 months between sales agreed and completion, means that the overall sales number for the year will be around 15% lower than last year, nevertheless, the continued demand over the autumn period will mean that the property market will have a great start in 2021.
With recent restrictions being announced and new ones coming into effect in the near future, we do see the housing market slowing down due to the weakening economy, alongside less support given out form the government.
First-time buyer demand is having an impact on the property market due to reduced availability of higher loan to value (LTV) mortgages, however, this is being outbalanced by the demand from existing homeowners.
Over the last decade, existing homeowners have accounted for a small amount of sales transactions, as there was a preference to dwindle down existing mortgage debt. However, with the recent lockdown and many families spending time at home even after the lockdown, it has come to light that space is an essential aspect, in light of recent events. With the shift in sales towards existing homeowners becoming the largest buyer once again, we do expect overall property sales to match figures of 2019.
We don't expect much change in the property market for the rest of 2020, although a moderation is expected in the latter part of 2021. With the current economic outlook and market sentiment, we need to keep an eye on how property prices will fluctuate with new stock coming into the market every day.
If demand were to weaken all of a sudden, there is a risk of overstock vs demand, which would result in reduced property prices, and could take up to 6 months to influence property prices. But for now, property prices are on the rise, and with demand outstripping supply, we see this lasting for the foreseeable future.