Does Single-family housing demand create shortages?
According to recent data, the number of three and four-bedroom homes for sale has plunged to a five-year low as purchasers hurry to grab up residences with more space.
Four-bedroom home listings have fallen by 58 percent in Scotland, 44 percent in the South, 42 percent in the North West, and 40 percent in the South East during the last year.
The increased demand for single family homes also had its effect on properties for sale in Cheltenham where the numbers were very low compared to the demand. According to property database Zoopla, ‘extreme market momentum’ caused the value of properties sold throughout the UK to double to £150 billion in the first 15 weeks of this year.
The surge in prices due to demand
According to the data, property prices in the United Kingdom increased by 4% in the year to March, compared to 2.1 percent growth the previous year. However, since January, when it was at 4.5 percent, the annual growth rate has dropped.
House prices rose the greatest in Wales and Yorkshire and the Humber over time, with 5.9% and 5.3 per cent increases, respectively. Manchester, Liverpool, Leeds, Nottingham, and Leicester all had price increases of more than 5% year on year, with Manchester leading the pack in terms of city growth.
In many sections of the country, low supply levels are still a major issue. At the start of this month, the overall number of properties available for purchase was 30% lower than it was at the same time last year.
While buyers flood the market, the overall number of residences posted for sale in the first half of the year is 19% lower than the same period last year, which is remarkable given the market’s closure for several months during the pandemic ‘One out of every 50 homes was sold between January 1 and April 15, up from one out of every 100 properties over the same period last year,’ according to Zoopla.
Factors adding to increase in single family housing demand
First-time buyers are returning to the market, boosted by the government’s 95% mortgage guarantee programme and the resumption of high loan-to-value mortgages, but this is compounding the supply and demand imbalance.
However, Zoopla believes that, despite ‘acute market activity,’ the housing sector will be ‘moderate’ as the year progresses and government financial support packages expire.
They also pointed out that the supply-demand imbalance that has created a highly tight market for family homes will begin to soften in the near future as homeowners become more comfortable opening their houses to viewings, hence increasing the supply of new stock.
As lockdowns across the country expire and some pre-pandemic “normalcy” returns, the scale of buyer demand will likewise diminish and the imbalance is likely to improve.
The imbalance in demand and supply
According to the findings, a dearth of three and four-bedroom homes on the market will stifle sales in the second half of the year. However, with second-steppers’ searching for more space in a new house, the number of apartments for sale is on the rise.
In the previous year, houses accounted for 59 percent of all listings, down from 76 percent in 2017. Buyer demand has increased by 27.5 percent year to date but however, as the lockdown restrictions have been eased, buyer demand has dwindled.
‘This occurs when households begin to focus on meeting up with friends and family, as well as enjoying leisure activities and amenities that haven’t been available since January,’ the report stated.
Effect on pricing
According to Rightmove data released this week, average asking prices increased by 2.1 percent in April to a new all-time high of £327,797, up £6,733 from March. Property prices have risen £20,000 to over £250,000 on average in the last year, according to new statistics from the Office for National Statistics.
According to the ONS’ Land Registry price paid-based index, house price inflation touched 8.6% in the year to February, the highest annual increase rate since 2014.
Studies suggest as buyers wait for new stock to become available, the market will naturally slow during the rest of the year and into next, as the supply of homes to buy narrows, especially for family residences.
They also predicted a robust start to 2022 in accordance with seasonal averages, stock repair will be gradual in the first half of the year. The average period between listing and agreement to sell is now 26 days, compared to 49 days in 2019.
The post-pandemic “reassessment of home” – households electing to modify how and where they live – is still underway, especially as office-based workers receive confirmation of flexible working arrangements, allowing them to live further away from the office.
Prediction for 2022
Higher levels of demand will continue to exist, and potential vendors with family homes to sell may find themselves in a strong position. However, due to a scarcity of supply, particularly for family homes, the market will naturally slow over the rest of this year and into the next, as purchasers wait for additional stock to become available before making a decision.
In 2022, there will be a strong start to the year in line with seasonal trends, but a return to more normal levels of activity among first-time buyers, the effect of the stamp duty holiday ending, and some buyers waiting for more stock to become available will improve stock levels through the first half of the year.