UK House Price Growth Losing Steam
- By Sam van de Schootbrugge
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- 2 min read
Residential property was a surprise outperformer in 2020. All three major UK private sector real estate data providers – Rightmove, Halifax and Nationwide – reported 6% (or higher) YoY house price growth in December. The largest beneficiaries of the urban-to-rural migration and stamp duty holiday were the North West, North East and Yorkshire & Humber (Chart 1).
Forecasts for 2021 hinge, by and large, on pandemic-related uncertainties. In Q1, stricter lockdowns have the potential to offset last-minute stamp duty holiday purchases. Momentum towards the back-end of last year was already fading, and, according to the Royal Institute of Chartered Surveyors (RICS), near term sales and house price expectations are negative (Chart 2).
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Summary
- Average asking prices fell 0.9% on last month, according to the latest Rightmove data.
- YoY changes remain positive, but early-pandemic momentum appears to be fading.
- Growth rates in the North of England are dropping, and asking prices in London are 1.3% below January 2020.
Real Estate Market
Residential property was a surprise outperformer in 2020. All three major UK private sector real estate data providers – Rightmove, Halifax and Nationwide – reported 6% (or higher) YoY house price growth in December. The largest beneficiaries of the urban-to-rural migration and stamp duty holiday were the North West, North East and Yorkshire & Humber (Chart 1).
Forecasts for 2021 hinge, by and large, on pandemic-related uncertainties. In Q1, stricter lockdowns have the potential to offset last-minute stamp duty holiday purchases. Momentum towards the back-end of last year was already fading, and, according to the Royal Institute of Chartered Surveyors (RICS), near term sales and house price expectations are negative (Chart 2).
Nevertheless, the current outlook indicates a strong second half of the year. According to the RICS survey, which samples 485 UK real estate branches, twelve-month price expectations are positive. Rightmove also forecasts a 4% rise in the national average house price in 2021, slightly higher than the average rise between 2010-2019 (3.7%).
Latest Data
The first house price data release of 2021 is here. Rightmove announced today that the average asking price fell 0.9% on the month. The UK’s biggest property website is the timeliest of all housing market indices and bases its data on advertised property prices – a leading indicator of future sales prices and a measure that follows closely HM Land Registry prices over time (Charts 3 and 4).
The 0.9% fall this month is the third MoM drop in as many months (Chart 5). According to Rightmove, the drop related to movers trying to tempt last-minute sales before the 31 March deadline. Despite the MoM fall, asking prices are up 3.3% YoY, in line with the long-run trend (national asking prices grew on average 3.5% YoY for 2011-2020). This annual growth rate is, however, down from 6.6% in December, and momentum appears to be levelling off (Chart 6).
Regional
Regional asking prices are down MoM, with Scotland suffering the largest decline (Chart 7). Annually prices remain significantly higher, with Greater London being the only exception (Chart 8). Prices in the North of England remain the largest winners, with annual growth rates at least 2ppt higher than the average for 2019-20.
The decline in momentum nationwide can be disaggregated to regional level. First, compared with last month, annual growth rates are down most in London (falling 5ppts), followed by the North East and North West. Meanwhile, asking prices have continued to grow in Wales (Chart 9).
Wales and the South West are also the only UK regions to have recorded YoY growth rates above the six-month average (Chart 10), indicative of increasing momentum. Annual growth rates in London, the South East and the East Midlands are all significantly lower than the six-month average.
Sam van de Schootbrugge is a macro research economist taking a one year industrial break from his Ph.D. in Economics. He has 2 years of experience working in government and has an MPhil degree in Economic Research from the University of Cambridge. His research expertise are in international finance, macroeconomics and fiscal policy.
(The commentary contained in the above article does not constitute an offer or a solicitation, or a recommendation to implement or liquidate an investment or to carry out any other transaction. It should not be used as a basis for any investment decision or other decision. Any investment decision should be based on appropriate professional advice specific to your needs.)