The UK property market is still running hot with demand outstripping supply and putting upward pressure on prices. We have not yet seen signs of any form of property crash but the current tensions between supply and demand cannot be sustained indefinitely and moreover the current level of demand is hard to reconcile.
Our expertise is based on the timely analysis of whole of market real-world data, we are not forecasters. We have seen slight movement in the market data but not enough to re-establish a “normal market”.
If the supply and demand paradox persists, property prices will rise but the question is how far and for how long?
As we are now one month on from the tapering of the Stamp Duty relief in England and Northern Ireland and the ending of Land Transaction Tax relief in Wales, we felt now was a good time to assess what has happened to the market in July 2021.
We set out to answer the following questions:
- To what extent have the high levels of demand that we have experienced since July 2020 subsided?
- Is the supply of property for sale to the housing market continuing to wane?
- What significant changes have occurred in the last month on property asking prices?
- How do the changes to demand, supply and pricing compare to what we’ve seen in the last “normal” year (2019)?
As a reminder to regular readers and as an update to new readers, TwentyCi measures:
- Supply by using the volume of new instructions, which are people putting their house up for sale with an estate agent
- Demand by using the volume of sales agreed in the UK property market
- Prices by using the initial asking prices of property which is listed for sale by an estate agent
July 2021 versus June 2021
The short answer as to what has happened since the end of the Stamp Duty holiday is not a lot.
Demand has fallen by a small amount; down 2% since June 2021 and supply has fallen by a little more; down 4% since June 2021.
Average (mean) asking prices have fallen by 3% since June 2021 but our view is that this fall is most likely to be housing mix related (i.e. lower-priced houses coming to the market) than any genuine fall in prices, because median prices were a 0% change month on month.
And finally, demand, which TwentyCi measures using the volume of sales agreed, has also hardly moved in the last seven days with volumes down just 3%. The last week however is 8.0% below the weekly average for the last year, but this is to be expected which such exceptional peaks in the last year.
In summary, any expected property market “crash” is yet to materialise.
July 2021 versus July 2019
The real issue, as we have reported prior to now is what happens when we compare July 2021 to the last “normal” year in 2019.
Demand is still way ahead of where we would normally expect the market to be – in fact, we have observed that the volume of sales agreed was some 16% higher in July 2021 than it was two years earlier.
Supply however has fallen much more drastically and is 11% down since July of 2019.
The following chart looks at the changes in supply and demand metrics by UK region:
The UK numbers we just referred to are on the far-right-hand side of the above chart.
Looking at the supply of properties first, supply volumes have fallen compared to the two years prior in every UK region aside from Inner London, Scotland and Northern Ireland.
However, demand for properties has risen in every region of the UK without exception.
In a normal market, we typically observe levels of demand at around 75% of supply volumes. In July 2021, this is 95%.
Once again, we highlight the problems for the industry of the demand and supply paradox.
We already know that the market is simply running out of stock to sell and without a fresh supply of stock at sustainable levels, the market will begin to break down and cease to be effective. Prices will increase yet further than they are today.