The post-lockdown pent up demand in the housing market, which gave rise to a summer boom in UK real estate activity, is increasingly being supplanted by fresh waves of competition amongst buyers seeking homes with more space and green access. Matching this demand has been a steady increase in supply levels as the number of new instructions grew for the fourth month in a row in September. This simultaneous peak in supply and demand has expanded house price growth yet higher, as government support measures continue to galvanise investors.
Halifax’s house price index reports that annual house price growth jumped from 5.2 per cent in August to 7.3 per cent in September 2020. This is representative of a 1.6 per cent monthly surge and brings the average UK house price to £245,747. London was a key driver of this buoyancy, with average quarterly price growth of 0.2 per cent in prime central property - the same heights as the ‘Boris Bounce’ experienced post-elections at the end of 2019. Further, prime outer London properties recorded two consecutive months of increasing prices over August and September 2020. Halifax analysis indicates that this is the strongest rate of growth since June 2016.
Buyers are highly motivated given the UK property market’s underlying institutional and infrastructural fundamentals. Add to that the fact that sellers on the market are re-evaluating their needs. Underpinning this dynamic is a highly conducive environment catalysing transactions including the stamp duty holiday, low-interest rates and schemes such as Help to Buy. These forces have coalesced to drive strong and stable levels of market activity in the medium term, with waves of competition for quality assets bolstering prices. As such, approximately 52 per cent of RICS surveyors experienced more buyer enquiries in September, with the number of offers accepted 154 per cent ahead of five-year averages in the week of 19th September.
Looking ahead, the government is taking steps to accelerate universal access to housing through measures designed to stimulate first-time buyer activity specifically. Prime Minister Boris Johnson announced plans to develop long-term fixed-rate mortgages with only 5 per cent deposits. By rescinding the requirement to undertake normal stress test rules, the scheme hopes to introduce “a form of state guarantee” to lenders to lower the risk of loans. This would provide enormous impetus, particularly to first time buyers with small deposits.
House price growth continues to beat expectations as mortgage applications surge to 12-year high. House prices in September were 7.3% higher than in the same month a year earlier – the strongest growth since June 2016.