townhouses in London with a 'sold' sign time to sell

UK housing market: the mismatch between supply and demand continues

Demand in the UK housing market is remaining at strong levels, while supply is still low. This is putting upwards pressure on house prices and highlights the importance of bringing forward more new-builds.

In the UK housing market, the number of properties for sale has decreased to its lowest level in more than six years, according to Zoopla. During the last year alone, one in 20 homes changed hands. This flurry of activity was driven by the stamp duty holiday and race for space.

Currently, the number of homes being put on the market is still not replenishing those that are sold. This had led to the most acute shortage of stock since 2015 when Zoopla first started tracking this. At the same time, there is an ongoing buyer frenzy.

Gráinne Gilmore, Zoopla’s head of research, says: “The post-pandemic ‘reassessment of home’, with households deciding to change how and where they live, has further to run, especially as office-based workers receive confirmation about flexible working, allowing more leeway to live further from the office.

“However, the lack of supply, especially for family houses, means the market will start to naturally slow during the rest of this year and into next year, as buyers hold on for more stock to become available before making a move.”

What’s going on with house prices?

The mismatch in supply and demand is continuing to put upwards pressure on house prices. The average UK house price has increased by 6% in the past year to the end of July, according to Zoopla’s latest House Price Index. This has pushed the average property price to £234,000.

Regions where the affordability is less stretched are seeing the strongest house price growth. Wales, Northern Ireland and the north-west of England are leading the way with 9.4%, 9.0% and 7.9% increases respectively.

A similar pattern is being seen on a city level too. For example, Liverpool is home to an average house price of £136,721. And the city by the Merseyside is leading house price growth with a 9.4% rise in the past year. House prices in Manchester and Belfast have risen by 7.7% and 7.5% respectively over the same period. On the other side, London has only seen 2.5% growth.

The importance of new-builds

Demand from potential buyers is continuing at elevated levels. The number of people looking to buy a property is 20.5% higher than the average for 2020.

There have been increased levels of activity among property investors and first-time buyers in particular. These buyers are considered net new demand with the vast majority having no property to sell. This is further putting a strain on the supply and demand gap.

With the undersupply of housing, the UK housebuilding sector can play an important role. First-time buyers can purchase new-build properties through the Help to Buy scheme. And more investors are seeing the benefits of investing in new-builds, especially those within build-to-rent developments.

What could happen moving forward?

Supply is expected to remain low well into the next year. This will likely lead to a slowdown in the UK housing market and house prices could ease back. Once the impact of the stamp duty holiday wanes and other government stimulus measures have been withdrawn, housing stock levels will start to recover gradually.

Gráinne Gilmore comments: “As we move into 2022, there will be a strong start to the year in line with seasonal trends, but after that, a return to more usual levels of activity among first-time buyers, the effect of the ending of the stamp duty holiday, and some buyers waiting for more stock to become available will result in a slow repairing of stock levels through the first half.”

Self-certified Sophisticated Investor

Please read

I declare that I am a self-certified sophisticated investor for the purposes of the restriction on promotion of non-mainstream pooled investments. I understand that this means:

I am a self-certified sophisticated investor because at least one of the following applies:

I accept that the investments to which the promotions will relate may expose me to a significant risk of losing all of the money or other property invested. I am aware that it is open to me seek advice from someone who specialises in advising on non-mainstream pooled investments.

High Net Worth Investor

Please read

I make this statement so that I can receive promotional communications which are exempt from the restriction on promotion of non-mainstream pooled investments. The exemption relates to certified high net worth investors and I declare that I qualify as such because at least one of the following applies to me:

STAY AHEAD OF THE MARKET

Sign up for first access to new developments and exclusive property investment opportunities.

We send limited and targeted emails on new launches and exclusive deals which best fit your areas. We are trusted by over 30,000 active buyers as their source for new stock.

  • New property developments
  • Professional market reports
  • Property deal alerts
  • Development updates
Manchester property investment

FIRST FOR NEWS AND KNOWLEDGE.

Receive trending news straight to your inbox and stay up to date on all of the property market trends and advice.

Established since 2005 we are a leading voice of authority and commentary on the UK property market. Our news is trusted by Apple News & Google News.

  • UK housing market
  • Mortgage & money
  • Buy-to-let landlords
  • Guides & advice

Talk to us

Speak to our UK property experts today:

 

+44 (0) 333 123 0320

Open from 9am-6pm GMT

 

+852 6699 9008

Open from 9am-6pm HKT