Frustrated sellers from last year are helping to drive stock levels higher, writes Knight Frank.
After months of low supply in the UK housing market, the number of listings is finally starting to rise.
Late into the spring market, supply is picking up as economic jitters mount and a belief grows that house prices may be peaking, a trend we explored in more detail last week.
Listings have been low since the end of the stamp duty holiday last September as owners hesitated due to a lack of purchase options. The result was a vicious circle of low supply that led to double-digit house price growth, spurred on by low mortgage rates, savings accumulated during the pandemic and the so-called ‘race for space’.
However, as stock levels increase it is not a uniform process across the country, data from OnTheMarket shows.
There was a 19.2% increase in the number of new listings between January and April this year in England and Wales. However, while there was an increase of only 5.7% in London (the smallest rise), the biggest growth was in Wales, where the number of new properties listed for sale jumped by a third.
The disparity reflects how supply is building more quickly in rural rather than urban markets.
Indeed, the 20 local authorities that registered the biggest increase in supply over the period were, on average, classified as 55% urban. For the bottom 20 areas (where supply fell), on average they were classified as 92% urban.
“I suspect it is a hangover from last year when so many rural owners didn’t list their house as they thought they wouldn’t be able to find anything to move to,” said James Cleland, head of the country business at Knight Frank. “What was a vicious circle is becoming a virtuous circle as higher levels of supply lead to more stock coming on.”
“A stronger sense of seasonality in more rural areas will have contributed to supply rising more quickly in the first few months of the year,” said Tom Bill, head of UK residential research at Knight Frank. “It’s also likely that in urban centres like London, sellers are less motivated by concerns over peaking property prices after weaker growth during the pandemic.”
We forecast that a more even balance between supply and demand will see UK house price growth slow to single digits by the end of the year.
It won’t be a uniform process and there will be many moving parts affecting prices across different parts of the UK, including the impact of cost-of-living pressures, higher mortgage rates, affordability constraints and the strength of local economies. We have also previously explored how the pandemic has boosted house prices in previously under-performing areas of the country.
However, in the short-term, higher supply looks set to put more downwards pressure on prices in less urban areas, softening the impact of a distortion caused by the pandemic.
Source: Show House News
