"The strength of the market in 2020 has eroded the available number of homes for sale and this will mean continued upward pressure on house prices in the short term."
The third national lockdown has created a 'perfect storm for the property market', with a slowdown in the flow of new supply for sale as demand rebounds, according to Zoopla.
Its research found that the latest Covid surge is stifling new supply of homes for sale, as vendors press pause on listing their home for sale, reducing flow of new stock by 12% compared to January 2020.
By contrast, buyer demand for property has rebounded after the Christmas break - growing even faster than at the start of 2020. In the period to the 17th January, demand for homes is 13% higher than the same period a year ago when the market had started to rebound in the wake of the General Election. New sales agreed are also running 8% higher than last year.
Increased buyer appetite over 2020 H2 has been largely attributed to stamp duty relief, but Zoopla believes it is more than the deadline motivating home movers.
While early January is typically one of the busiest times for new buyers, this year activity is compounded by the impact of the pandemic. With more time spent at home, and more pressure on homes to deliver than ever before, more homeowners have realised that their home falls short and have been galvanised to move. Rising house prices have also created more equity in people’s homes, adding further impetus - and financial ability - to move.
The strength of the sales market in 2020 H2 saw 47% more sales agreed than the same period in 2019. This absorbed a lot of available supply, with the total number of homes available ‘for sale’ 6.4% lower than a year ago.
Rising demand and slow growth in supply is driving up house prices, which are running nationally at 4.3% year on year growth - the highest rate recorded since April 2017.
At a country level, Wales is the fastest growing market with prices rising at 5.4% year on year. At a city level, Liverpool is growing fastest with house prices 6.3% higher than a year ago - its fastest rate of growth for 15 years, since before the global financial crisis. Manchester is close behind with a growth rate of 6%, returning to levels of inflation last seen two years ago.
There are three regions where house price growth is at its highest for a decade North East, North West and Yorkshire and Humber - all are registering the highest growth since 2007, with prices currently rising between 4% and 5.5% a year.
House price growth has increased in southern regions of England but affordability pressures limit the scope for above average growth. Prices in London are 3.1% higher over the last year but this is way off the 20% annual growth rate recorded in July 2014.
Richard Donnell, research and insight director at Zoopla, commented: “The housing market momentum built up in 2020 H2 has rolled into early 2021, despite a spike in the pandemic and a third lockdown. Sellers are more cautious however and appear to be waiting for case numbers to drop much further before listing their home, or until we see a return to tier based restrictions.
“The strength of the market in 2020 has eroded the available number of homes for sale and this will mean continued upward pressure on house prices in the short term. The most affordable parts of the UK are recording the highest rate of price growth for 10 years up to 5.4% a year. We still expect house price growth to slow towards 1% by the end of the year.
“The rush to beat the stamp duty deadline continues and sellers who agreed to buy a home in 2020 would reasonably expect to make the stamp duty saving. Delays mean we expect up to 70,000 sales agreed in 2020 to miss the deadline meaning the case for a short extension is growing.”