Over the last five years, the only time demand has exceeded supply to a greater extent was in January 2020 following the general election of December 2019. New buyer registrations spiked after a year of domestic political turmoil.
As the autumn selling season gets underway, unseasonably low supply has caused the latest imbalance, which is likely to place upward pressure on property prices.
Demand has not been a problem since the UK property market re-opened in May 2020. The number of new prospective buyers in September was 57% above the five-year average between 2015 and 2019. In fact, the figure was only 13% below last September’s figure, two months into a stamp duty holiday and during a period of post-lockdown exuberance.
Knight Franks says that the UK economy is facing inflationary pressures this autumn but near-zero interest rates and low unemployment have underpinned demand, even as the stamp duty holiday wound down.
Tom Bill, head of UK residential research at Knight Frank, undertook the analysis. He concluded that “the rising cost of living, however long it lasts, may cause some fraying around the edges but demand is likely to remain robust over the next six months.”
Bill continued: “The vicious circle of low supply won’t become a virtuous circle overnight. More prospective vendors will come forward as they find their own purchase options, a process that is underway but requires time. Sales instructions have hovered around the five-year average this year but the shelves are emptying more quickly, creating the kind of disruption seen in other parts of the economy.
“As a result, supply didn’t pick up this September as it has in previous years. The number of instructions to sell was 26% below the five-year average and 51% below September 2020.
“Tighter supply means a greater proportion of buyers and sellers will be needs-driven over the next several months. However, there will be a seasonal injection of new supply next spring.
“For now, the imbalance is keeping upwards pressure on prices even though the stamp duty holiday has ended. As supply and demand normalise, the main UK house price indices should continue to slowly deflate.”