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Demand for scarce stock of family homes drives up prices by 6%

Written by: Liz Bury
Data from property listings site Zoopla has shown that the average price of a family home rose 7.6% and flats gained a more modest 1.2%, from January to July.

The market also saw a step change in speed of sales, with the average time from listing to sale-subject-to-contract at 26 days, down from 49 days in 2019.

Zoopla expected average price growth to settle at 4 to 5% by end of the year.

Supply constraints

The overall price increase of 6% was driven in large part by lack of stock, including particularly a dearth of family homes on the market, as a “reassessment of home” owing to the pandemic saw borrowers want more space.

Total stock for sale was 26% lower this year compared to end of July 2020, and levels were expected to remain depressed well into next year. On the demand-side, the picture was one of growth running at 21% this year.

Supply constraints were most evident for houses, and properties priced up to £350,000.

Zoopla ascribed the lack of supply to three factors: sheer level of activity in the first-half, increased demand from first-time buyers (FTBs) and investors, and softening in new-build completions.

Improved mortgage availability for FTBs was a factor in adding to net demand because people in this group do not have properties to sell.

And, demand from BTL investors grew by 21% in the year to end of July, compared to the same period last year.

Price rise variations

Price growth was highest in Wales at 9.4%, Northern Ireland at 9% and the North West at 7.9%.

City-wise, seeing strong growth were Liverpool at 9.4%, Manchester with 7.7% and gaining 7.5%, Belfast.

London continued to lag, with a rise of 2.5%, although this was up on 1.9% in March.

Across the UK, houses have tended to see high-single-figure rises, while price growth for flats was generally in the low-single-figure range.

Slow stock rebuild

Zoopla’s analysis of sales this year showed mortgaged home-movers as the largest customer group at 37%, mortgaged FTBs at 30%, cash owners or investors 24% and at 9% of the market, buy-to-let mortgagees. 

The house price growth figure of 6% was greatly inflated compared to 2.3% seen in the same seven months last year.

However, price rises had slowed compared to the figure of 6.3% recorded for the six months to June this year.

The average value of a home in the UK is now £234,000.

Gráinne Gilmore, head of research at Zoopla, said: “The lower of supply of homes listed for sale may lead to a natural slowing in buyer interest, albeit from high levels. A return to more normal levels of market activity will result in a slow rebuilding of stock through H1 2022.”

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