"What’s happening is the release of pent-up demand that has been building for years against the backdrop of Brexit, tax changes and tighter lending rules."
The firm found that discounts are still being negotiated due to Covid-19, but sellers are hardening their resolve as demand grows more quickly than supply.
The number of new prospective buyers registering was 94% higher than the five-year average in the week ending 25th July. The equivalent increase in supply was 54%.
The same imbalance can be found both inside and outside the capital, showing that the competition is not just intensifying among buyers looking for more outdoor space.
On average, offers were accepted at 98% of the asking price in July, which is a percentage point higher than the same month last year.
Similarly, offers made have gone from 94% to 95% over the last 12 months and Knight Frank says there have been numerous instances where agreed prices have exceeded the asking price in recent weeks.
Knight Frank said that for those not watching the market closely, "the scale of pent-up demand has probably come as a surprise". Anecdotally, it says some buyers have "been taken aback by the stiffness of the competition in recent weeks".
Tom Bill, head of UK residential research at Knight Frank, said: “What’s happening is the release of pent-up demand that has been building for years against the backdrop of Brexit, tax changes and tighter lending rules. This is putting upwards pressure on prices. In fact, prices are firmer now than they were a year ago, based on the level of offers made and accepted.
“This doesn’t have the over-exuberant feel of a price bubble. With a global pandemic still underway, buyers are not getting carried away. It does, however, feel like a slightly artificial moment in time. Covid-19 has been a great accelerator for existing forces and patterns of behaviour across all areas of the economy and the housing market is no different.
“I would expect the market to eventually self-correct as there is probably only so far prices can climb against the backdrop of a global pandemic.
“What should simultaneously begin to emerge is what the new longer-term normal looks like. The property market will be no different from many other sectors of the economy in that respect. It will ultimately depend on issues outside of its control including vaccine development and the government furlough scheme.
“For now, prices are heading in one direction.”
