The Big Squeeze
Welcome back to our monthly blog!
We are here to keep you in the know regarding the market outlook locally and at large. In our September 2021 edition, we touched on the chief motivations of buyers and the quest for more space, which was driving up house prices compared to the same time last year. Working from figures from July and August, this pattern has largely held. Currently, the house price growth nationally rests at 6.1%, marginally up from the 6% growth that was seen in July.
This continuous growth is propagated by an imbalance between demand and supply in the market. Demand for homes is up 19% from the same time in 2020, and yet the flow of new supply rests at -5%. Considering that the July figure for this was -3% and that the overall stock of homes for sale is down 28%, stock may become increasingly sparse as the year comes to an end. More buyers and fewer houses of course, creates upward pressure on property prices. This upward pressure is felt in London as well, but not as strongly, with house price growth sitting around a third of the overall national (2.2%).
Demand in London
Demand, however, is picking up in London, as offices re-open and travel restrictions are lifted, with a rise of 14% over August. We can expect that the 2.2% figure will continue to grow, as more buyers compete for supply that is becoming increasingly squeezed. This comes as surprise for those who believed that buyers’ increased activity was due to the extended stamp duty holiday savings. Although it only came to an end on 30 September, for any home going under offer during July or August, it would be very unlikely that the sale would be able to complete in time to take advantage of the holiday. This means that, in terms of understanding buyer motivation at large, the re-evaluation of homes brought about by multiple lockdowns and the consequent search for increased living space, is a stronger explanation for the growing demand. And this pattern is expected to last until at least the end of this year.
On top of driving up house prices, this imbalance also affects the time properties spend on the market. In short, the market is moving quickly. On average, houses are spending less than 30 days on the market. Anecdotally, here at EO, things are moving even faster. Within the last month, we have sold subject to contract three properties in less than 14 days: Domelton House in SW18, Jersey Road in SW17, and Morval Road in SW2. All three properties went under offer after only one day of viewings, and Jersey Road had offers in only a week after coming online.
It may be possible that the squeeze in supply will cause a self-limiting impact on the market, but with the expected cliff-edge drop in demand from the end of the stamp duty holiday never coming to pass, and the lasting effects of the ‘race for space’, now is the time for homeowners to sell and sell quickly.
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To learn more about the race for space, CLICK HERE