Robust demand and limited stock to support prices

The housing market cooled in July as the stamp duty holiday began to unwind. Newly agreed sales and buyer enquiries dropped back, annual house price growth began to stabilise, and transactions fell. However, the RICS balances compare activity to the previous month when transactions hit a record high so while activity may have softened, it has by no means collapsed. Web searches for the property portals Rightmove & Zoopla remain well above pre-virus levels, providing further evidence that the stamp duty holiday was just one of many reasons for strong home purchase demand over the past year. Meanwhile, the amount of second-hand stock on the market is very limited, so competition between buyers is set to remain strong. As a result, we continue to expect house price inflation to cool rather than collapse when the stamp duty holiday ends altogether in October.
Andrew Wishart Property Economist
Continue reading

More from UK Housing

UK Housing Market Data Response

IHS Markit/CIPS Construction PMI (Dec.)

The construction PMI declined last month to end the year on a negative note, more than erasing the gain made in November. Despite tentative signs that they are starting to ease, we expect labour and supply shortages will continue to dampen output in the near term.

7 January 2022

UK Housing Market Data Response

Halifax House Prices (Dec.)

Another substantial rise in the Halifax house price index in December ensured that the lender agreed with Nationwide that the rise in house prices over the 2021 calendar year was the strongest for at least 15 years. And there is no sign of prices losing momentum yet.

7 January 2022

UK Housing Market Update

UK house price growth set for a year of two halves

Strong demand will ensure that house prices maintain their momentum in the first half of the year. But rising mortgage rates will weigh on demand further out, causing prices to cool.

6 January 2022

More from Andrew Wishart

UK Housing Market Update

What if we are wrong about interest rates?

While the Monetary Policy Committee (MPC) became more hawkish at its August meeting, an increase in interest rates on the scale it expects would not undermine house prices. But more stubborn inflation than anticipated and a hike in Bank Rate to 1.5% by end-2023 would likely cause house prices to fall by 4%.

16 August 2021

UK Housing Market Data Response

RICS Residential Market Survey (Jul.)

Despite new buyer enquiries dropping back in July, house prices continued to rise as buyers competed for limited stock.

12 August 2021

UK Housing Market Outlook

House price growth to cool but not collapse

There are already signs that the end of the stamp duty holiday will take some heat out of the housing market, with house price inflation set to cool from 10% to 7% by the end of the year. But as we think that the tax break was just one of several factors behind the current boom, we expect house price inflation to cool rather than collapse. Remarkably limited damage to the labour market from the recession, and low and declining mortgage rates mean that house prices are likely to rise by about 3% y/y in both 2022 and 2023, stronger than expected by the consensus.

2 August 2021
↑ Back to top