Since the re-opening of the English property market, national asking prices have now consistently maintained high levels for 10 consecutive weeks. Although this is excellent for UK homeowners, what does this really mean for UK vendors? Have property asking prices actually risen, or is it that there are either more expensive properties that have come to the market or fewer cheaper properties that have come to the market since lockdown ended?
The following chart shows the median initial asking price for property listings. These have been compared to a benchmark which has been calculated as the median asking price observed throughout 2019.
Median asking price is calculated by taking the middle value of all asking prices when ordered from smallest to largest. This is a more robust measure for determining trends when accounting for outliers. (For example, £10m+ properties in London).
This chart clearly shows the increase in property prices, which has been a constant trend in recent weeks. Average increase in price since the re-opening of the English markets to the tune of 10.2% above 2019 prices.
Property Type is a key attribute towards determining the price of a new listing. Looking specifically at the stock being instructed once the markets re-opened (May-Jul 2020) and comparing to the previous year will allow us to determine whether the composition of stock being instructed may be a factor driving asking prices to levels greater than 2019 norms.
By looking at the above chart we can see the average asking prices of each of the property types. Detached homes generally drive a higher average asking price whereas on the other side terraced properties tend to demand lower prices. On the second axis we are measuring the percentage difference in stock that has come to the market in the last 3 months (May-Jul 2020) and have compared with a time pre-COVID (May-Jul 2019) to see how the landscape has changed for new instructions. In truth, the landscape has seen marginal changes, with semi-detached properties seeing 3% growth and terraced properties being 2% under-represented. If these margins were more significant then we may be able to conclude that more expensive property types are coming to market now, driving a rise in national asking prices, but this is not the case at the moment.
So, to summarise this point, the current high asking prices are not down to the fact that the mix of different property types coming to the market has changed.
Now we have determined that property type is by and large not responsible for the increase in asking prices, we now look into whether there are significant regional variations. After all, a terraced property located in the heart of London demands a price far beyond most detached homes in the home counties.
Median asking price is calculated by taking the middle value of all asking prices when ordered from smallest to largest. This is a more robust measure for determining trends when accounting for outliers. (For example, £10m+ properties in London)
The above heat map shows the median asking prices demanded by regions across Great Britain. Scotland, Wales, North East, North West and Yorkshire & The Humber all see properties valued lower. Whereas regions such as the East of England, South East and South West are the areas where properties are more expensive in Great Britain. Note that London stands alone in seeing the most expensive property prices in Great Britain.
In this heat map we are showing the % change in instruction volumes for the last 3 months (May-Jul 2020) and comparing with the previous year (May-Jul 2019). This enables us to see the composition of listings coming to the market and which regions are recovering from the closure of the property market fastest.
We can clearly see that most regions in the South and Midlands have recovered at similar rates, however areas such as Scotland, Wales and to an extent also the North East are currently operating at much lower instruction volumes proportionally than they were at the same time period in 2019.
This is not surprising considering the English property marketplace opened up first, with Scotland and Wales following weeks afterwards. However, what this does mean is that national asking prices are currently greater, in a time where Scotland and Wales (two regions with lower regional asking prices) are under-representing to the national figure. But by how much is this caused by the regional variation and are UK vendors able to sell their property for more money?
To put this into perspective, last year Scotland contributed 6.3% of national instructions and Wales contributed 4.1%, so combined this is 10.4% of all instructions throughout the UK. The year-on-year changes that Scotland and Wales have seen in recent months of 41% and 30% respective calculates at 3.73% missing stock as a result of Covid from these two regions. At a national level this is a mere drop in the ocean, and we are actually seeing price increases in most other regions across the UK.
So, to summarise this point, the current high asking prices are not down to changes in the mix of properties from each region coming to the market.
So, What is Causing Property Prices to Increase?
Now we have concluded that property type and regional bias are not playing a significant part in the UK’s recent property asking price performance, it still leaves the question unanswered as to what is causing property prices to remain at inflated levels of +10% when compared to 2019?
Is the rising in asking prices the result of pent-up demand from buyers during lockdown shifting the scales to a sellers’ market? Many of the portals are reporting significantly higher demand for property and higher demand very often leads to higher prices.
Perhaps the rising in asking prices is also as a result of estate agents becoming more competitive, accepting vendor valuations for their own property to win instructions?
Either way, time will tell as to whether this power shift for vendors will lead to sustained inflation in purchase prices.