Values and activity both show growth after a slow start to the year
SUMMARY
House prices rose by 0.7% in February, according to Nationwide. This more than counteracted January’s -0.3% fall. We expect modest value growth to continue this year as demand remains high and, as the Budget on Wednesday showed, Government remains committed to supporting the housing market. Two key measures confirmed will support continued price growth and high activity levels.
The big announcement for the housing market was a widely trailed extension to the SDLT holiday. Purchases up to £500,000 will remain exempt until June, while those up to £250,000 will pay no SDLT until the end of September, when the thresholds return to pre-pandemic levels. This will be a relief for buyers struggling to hit the previous March deadline, but is likely to create similar anxiety for those hoping to meet the new June and September cut-offs.
The second major announcement was a guarantee scheme for lenders offering 95% mortgages. The details look very similar to the Help to Buy Mortgage Guarantee scheme which ran between 2013 and 2017, and probably gave a small boost to higher loan to value lending. The new scheme may have a similar impact, but is unlikely to dramatically alter the shape of the mortgage market, which has been dominated by lower LTV mortgages since the Global Financial Crisis.
Activity levels picked up over February, as the slow start to 2021 reported in the January RICS survey and observed in weekly activity data from TwentyCi has not lasted. Numbers of sales agreed and instructions to sell both increased towards the end of January and stayed high during February. Demand has been consistently stronger than supply, supporting price growth. Surveyors reported that new buyer enquiries were increasing more than new instructions to sell in January. And TwentyCi data shows more sales agreed than new instructions to sell since the start of the year.
The average UK rent increased 1.3% over the year to January, according to the ONS. Rents grew the most in the South West and East Midlands, up 2.2%, and were weakest in London, up 0.8%.
Annual house price growth in November was strongest in Midlothian, at 9.5%, followed by Rossendale in Lancashire at 8.7%. House prices fell most over the same period in Aberdeen at -1.7%, followed by Rochford in Essex at -1.5%.
Source Savills using HM Land Registry and Registers of Scotland (6 month smoothed)*
Annual house price growth to Nov-20
Source Savills using HM Land Registry and Registers of Scotland (6 month smoothed)*
The RICS survey for January showed the number of surveyors reporting rising levels of activity had fallen into negative territory for the first time since the first lockdown in March last year.
Other metrics also point to a slow start to the year, but with activity picking up in February. We may see this reflected in the February survey.
The extended stamp duty holiday may also entice buyers concerned about missing the previous March deadline back into the market.
The majority of surveyors reported slowing activity levels
The RICS survey can be a good early indicator of house price movements, which are later picked up by other indices. Given the current pace of change, including new policy announcements, it may for the time being only reflect the state of the market as it is now.
In January, the majority of surveyors continued to report price growth, although less than in December.
Nationwide reported a three month growth figure of 1.4% in February, marginally lower than January.
The ONS index, which tends to lag the others, dropped slightly to 3.8%, for the three months to December.
House price growth also begins to slow
The number of completed transactions in January fell by over -25% month on month, yet are still 22% higher than the 2018 to 2020 three year average.
The extended stamp duty holiday will now have a staggered end, with the nil rate band falling from its current £500k to £250k at the end of June, and then back to £125k at the end of September. It is therefore likely that there will be peaks in transactions coinciding with the two points at which SDLT thresholds are now planned to change.
January transactions fell from December’s peak but remain high
Recent house price growth
|
Nationwide (UK to Feb, Regions to Q4 2020) |
ONS (to Dec-20) |
Savills (to Nov-20) |
|||||||
| m/m | q/q | y/y | m/m |
q/q |
y/y | m/m | q/q | y/y | |
| UK | 0.7% | 1.4% | 6.9% | 1.3% | 3.8% | 8.4% | 0.8% | 1.9% | 3.7% |
| London | - | 1.6% | 6.2% | -1.3% | 0.7% | 3.5% | 0.9% | 2.1% | 4.0% |
| South East | - | 2.4% | 8.0% | 0.5% | 2.5% | 6.1% | 0.7% | 1.7% | 2.7% |
| East of England | - | 2.0% | 6.4% | 2.0% | 2.9% | 7.0% | 0.6% | 1.5% | 2.7% |
| South West | - | 2.1% | 6.4% | 2.2% | 4.2% | 10.1% | 0.7% | 1.8% | 3.3% |
| East Midlands | - | 3.9% | 8.5% | 3.0% | 5.8% | 10.6% | 0.8% | 1.7% | 4.3% |
| West Midlands | - | 4.3% | 7.4% | 1.4% | 3.9% | 9.4% | 0.7% | 1.8% | 4.1% |
| North East | - | 2.7% | 6.4% | 1.6% | 3.6% | 9.2% | 0.6% | 2.1% | 3.2% |
| Yorks & Humber | - | 3.4% | 7.6% | 0.6% |
5.6% |
10.5% | 1.0% | 2.1% | 4.5% |
| North West | - | 3.5% | 8.0% | 2.7% | 5.6% | 11.2% | 0.9% | 2.0% | 4.6% |
| Wales | - | 2.7% | 6.6% | 1.9% | 6.6% | 10.7% | 0.9% | 1.9% | 4.3% |
| Scotland | - | 2.0% | 3.1% | 1.1% | 3.2% | 8.4% | 0.7% | 2.1% | 3.8% |
| Source Savills using HM Land Registry and Registers of Scotland (6 month smoothed)*, Nationwide (seasonally adjusted), ONS (seasonally adjusted) |
New house price forecasts coming soon
In the meantime, our mainstream forecasts published in September 2020 are here