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UK Housing

UK Housing Market Chart Book

UK Housing Market Chart Book

Pick up in London demand will be fleeting

Despite the permanent increase in working from home, the end of pandemic restrictions has triggered a resurgence in demand in London’s rental and house purchase markets. Annual inflation in the ONS House Price Index for London has already risen from 3.8% in January to 8.1% in February, and more timely indicators point to a further acceleration in the near term. Moreover, some central boroughs such as Camden and Westminster have reversed previous dips in house prices. However, with mortgage affordability more stretched in the capital than in other regions, we expect rising mortgage rates to cool house price inflation later in the year.

22 April 2022

UK Housing Market Chart Book

Peak demand

Most leading indicators of housing market activity and house prices remain strikingly buoyant, but the first signs that demand will soften are now appearing. There is no question that house prices will continue to rise apace over the next few months. Buyer demand remains strong and signs that supply has begun to improve have translated into higher sales volumes rather than any moderation in prices. But it typically takes six to nine months for interest rate hikes to start to weigh on the housing market and some early signs of waning demand are now materialising. Web searches for homes for sale slipped to their lowest level since June 2020 in March, and consumer confidence took a big hit in February even before Russia invaded Ukraine.  We expect rising mortgage rates and the squeeze on real incomes to cause house price growth to slow from over 10% y/y now to around 5% by year-end and 2% in 2023.

24 March 2022

UK Housing Market Chart Book

Homeowners to keep on moving in 2022

Homeowners appear to be pressing ahead with plans to move house even though stamp duty is now fully reinstated. Transactions inevitably dipped last October as sales were rushed through in September to take advantage of the tax relief. But since then, they have risen to 107,000, well above the 2019 average of 98,000 a month. We suspect that the adjustment to remote working is continuing to boost activity. After all, while the share of mortgaged households that moved house rose to its highest since 2007 last year, at 7% it is still a minority, and far fewer than have had their working patterns altered by the pandemic. As a result, home mover activity and transactions look set to be strong this year. But beyond that, rising mortgage rates and a diminishing stock of household savings will act to restrain activity.

23 February 2022
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UK Housing Market Chart Book

London transactions outperform, but not prices

The jump in transactions during the pandemic was larger in London than other regions as the market didn’t experience the same drop in supply as elsewhere. That reflected many existing homeowners adjusting to remote working by moving further afield, giving an opportunity for first-time buyers to get on the London housing ladder. More plentiful supply has also caused house price growth in the capital to underperform the national average since the start of the pandemic. While house prices rose by 16% between Q4 2019 and November 2021 nationally, the average increase in London was 9%. Outer London boroughs tended to outperform more central areas, but Hammersmith & Fulham, Kensington & Chelsea, and Islington were striking exceptions.

25 January 2022

UK Housing Market Chart Book

Strength to persist into 2022

The continued strength of the housing market after the end of the stamp duty holiday shows that it was far more than the tax break that kept prices surging in 2021. The three key drivers of demand - low mortgage rates, high household saving, and a reassessment of housing need given remote working - all remain in place. As a result, there has been no decline in appetite to move house as indicated by very high web search activity for homes for sale. But with stock limited, that is more likely to translate into higher prices than a boom in transactions. That’s why we expect house prices to increase by a further 5% in 2022, more than most other forecasters expect. This will be the final UK Housing publication of the year. Capital Economics’ London office will be closed after 24th December and will reopen on 4th January, when we look forward to being back in your inbox. In the meantime, we’d like to wish all our readers a Merry Christmas and a Happy New Year.

23 December 2021

UK Housing Market Chart Book

Little sign of momentum in prices abating

The end of the stamp duty holiday has had remarkably little impact on buyer demand. If anything, the imbalance between strong home purchase demand and limited supply is intensifying. Indeed, Rightmove reported that the average time to sell a home continued to drop in October. That’s consistent with strong competition between buyers bidding up prices further in the near term, although in London these pressures appear to be weaker.

19 November 2021

UK Housing Market Chart Book

Residential demand returns to London

While the UK has seen house prices boom over the past year, central London has not joined in as increased remote working led buyers to shun the capital for more space in the suburbs and further afield. But indicators of demand show that it is far too early to call time on city living, with demand now returning to the purchase and rental market despite prices remaining far higher relative to earnings than in other regions.

18 October 2021

UK Housing Market Chart Book

Prices to continue rising as stamp duty holiday elapses

There is no doubt that demand cooled after the stamp duty discount was reduced. But a collapse in new listings has eclipsed the decline in new buyer demand, suggesting that prices will at least hold their ground in Q4 when stamp duty returns to normal. Moreover, with elevated household saving still supporting deposits, mortgage rates falling as competition between banks intensifies, and many households reassessing their homes in light of remote working we suspect demand will continue to surprise to the upside. Indeed, web search activity increased in September suggesting that the inevitable dip in transactions in Q4 will be short-lived. As a result, we expect house prices to rise by 10% y/y in Q4 2021 and by 5% in Q4 2022, above the consensus of 6% and 3.5% respectively.

21 September 2021
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