"Strong house price growth of 4.7% in May is driving higher mortgage value applications - a trend that will continue regardless of the stamp duty holiday deadline."
Buyer demand is down 28% from its pandemic-peak, moderated by tomorrow’s stamp duty deadline. However, demand is still acute and remains 55% higher than the average recorded in the more ‘normal’ market of 2019.
The supply of property listed for sale continues to fail to keep up with demand, with total listings down by 24% year on year. However, despite the lack of homes for sale, the UK remains on course to register 1.5m sales in 2021.
Intense market activity over the last 12 months has accelerated house price growth, pushing 1.8m UK properties into a higher stamp duty bracket. These figures emerge at the same time as stamp duty relief starts to taper, marking a double stamp duty win for the Treasury.
Of all UK homes, 940,000 additional properties will now attract some level of stamp duty at 5% should they sell, and an extra 130,000 will command some level of stamp duty at 10%.
The average additional stamp duty payable on homes that have moved up into the 10% stamp duty band will be around £6,100 after the end of the tapered stamp duty holiday in September, while the additional cost for the average home that has moved up into the 5% band will be around £725.
Strong buyer appetite has also shaped the time it takes to sell a property. Down from 42 days in May 2019 to 22 days in May 2021, time to sell has almost halved, even though May is typically one of the fastest moving months in the property calendar.
This increase in the pace of a sale reflects how buyers are continuing to make their move regardless of the stamp duty deadline - with the majority of sales agreed in May unlikely to benefit from the larger SDLT relief.
The largest share of demand is for homes priced up to £250,000, meaning they are stamp duty exempt until the end of September when the tapering period comes to an end.
While buyer demand for properties below £250,000 is down 24% from April’s highs in England, demand levels remain 75% higher than the average recorded in 2019’s ‘normal’ market.
At the same time, demand for properties priced over £250,000 has dipped by a third since April (the last point at which buyers could try to benefit from the maximum SDLT saving), but remains up 86% compared to average 2019 levels.
Average house prices rose by 1.1% in the three months to May, taking the annual rate of growth to 4.7%, matching that in February of this year, which was the highest since the start of 2017.
The spread of price growth continues to widen across the country, with Wales up 7.1%, Yorkshire & the Humber up 6.2%, and the North East up 5% - marking a ten year high for these regions.
Liverpool (7.9%) and Manchester (7.2%) continue to register the highest levels of price growth amongst the UK’s largest cities. Meanwhile, some of the most affordable markets are recording the highest house price growth with Rochdale (9.9%) and Bolton (8.7%) topping the league.
David Ross, managing director of Hometrack, commented: “Acute buyer demand is fuelling mortgage market activity, with applications up over 15% on this same period last year. At the same time, strong house price growth of 4.7% in May is driving higher mortgage value applications - a trend that will continue regardless of the stamp duty holiday deadline.
“We anticipate that ongoing demand in the sales market throughout the summer will translate into sustained activity in the mortgage market, with activity continuing at pace irrespective of the stamp duty holiday deadline. We expect mortgage application volumes to remain strong through and following the tapering off period, which comes to a close at the end of September.
“While a proportion of buyers have been motivated by the stamp duty saving up until now, a new cohort is set to take their place. With many workplaces only just confirming their post-pandemic flexible working policies, more homeowners are finally able to make their next move with certainty - a trend that will be reflected in mortgage application and approval figures throughout the remainder of the year.”
