Knight Frank has released fresh data that demonstrates the supply shortage in the UK property market.

The figures reveal that there were a quarter fewer homes listed for sale in England and Wales in March this year compared to 12 months ago.

Houses are in particular short supply in relation to existing demand. The number of houses listed for sale was 33% lower over the 12-month period while the number of flats was 7% higher.

It is more acute in parts of the country that have experienced stronger demand due to successive lockdowns.

Among the house listings, the number was 3% down in London compared to a drop of 42% in south-west England.

Part of the problem relates to the first two months of this year, according to Knight Frank.

The agency states, ‘January and February were marked by uncertainty over new Covid variants and the vaccination programme was in its early stages. On top of that, many parents were home-schooling. All of which meant new sellers were reluctant to list their property and we are seeing the effects of that now.

‘When demand escalated sharply in March, supported by the original stamp duty deadline at the end of the month, the best properties sold relatively quickly.

‘As those properties went under offer, sellers hesitated as they were unable to find anywhere to move into themselves, exacerbating the supply shortage and putting upwards pressure on prices’.

Tom Bill, head of UK residential research at Knight Frank, commented: “The current supply shortage represents a bumpy exit from the pandemic and tells us very little about how the property market is going to perform over the next 12 months.

“The last year has shown the importance of looking beyond short-term distortions in the property market.”

One reason Knight Frank believes the imbalance will correct is that the number of market valuation appraisals is rising, as the chart below shows.

Appraisals take place when owners want to know the market price of their property before listing and is a leading indicator of supply.

The number of appraisals was above the level seen in January 2020 for the first time in six months in March. Last January was marked by a pick-up in demand and supply following the general election. Total available supply also increased for the first time in six months in March although it was still 15% down on last January.

While the supply of houses fell by a quarter in the year to March, there was a 22% increase in the number of them going under offer.

Knight Frank ultimately expects downwards pressure on prices to return once supply increases.

But in the meantime, property prices are not becoming detached from their underlying value in a meaningful way, the sign of an asset price bubble, the company said.