Sentiment rises as property market activity soars

Strutt & Parker has launched its quarterly house price forecast, revealing that the strength of Q1 2021 property sales has moved sentiment from one of cautious optimism to outright positivity.

The company has retained its previous prediction of 5% best-case scenario property price growth in 2021 for both the whole UK market and Prime Central London, with a downside risk of prices remaining flat.

The company has stuck with its five-year forecast, estimating price growth in the UK of between 15% and 25% and in prime central London 15% to 35%.

Guy Robinson, head of residential agency at Strutt & Parker, said: “The past 12 months have really been a journey into the unknown and predicting the sometimes unpredictable. When the markets opened last year following the first lockdown, the initial topic of conversation was about how quickly the market would bounce back. When it did outperform everyone’s expectations, it shifted to how long this level of activity could be sustained for. We’re 12 months on now and have seen unprecedented levels of activity since the market reopened last May and still registering vast numbers of applicants. The market doesn’t seem to be slowing down, with activity bolstered by the extended SDLT holiday.

“While life isn’t completely back to normal, and the headline figures for our forecast remain unchanged, the vaccine rollout has increasingly contributed to consumer confidence and some pockets of the market could outperform the upside of 5%. The main concern, lack of stock, remains to be in some of the hottest country markets. But with older generations becoming increasingly confident in entering the property market, and more comfortable with physical viewings, the shortfall between stock and demand may diminish, potentially having an impact on the levels of competition witnessed so far this year. While conversation has been dominated by Covid-flight and an escape to the country, activity levels in London have been getting increasingly stronger, even without international buyers being able to physically come back into the market.”

According to the Nationwide House Price Index, UK property prices grew by 6.3% in the year to Q1 2021, on par with growth in the year to Q4 2020 (6.4%). These quarters are the highest year-on-year growth since the year to Q4 2014.

Y-o-Y growth over the year to Q1 2021 shows that, on a regional basis, the best performers were the North West (8.2%), West Midlands (7.6%) and Northern Ireland (7.4%).

London saw the lowest positive growth at 4.8% and no regions saw negative growth.  Quarter on quarter growth in the UK was 1.2% in Q1 2021, down from 3.0% in Q4 2020.

Kate Eales, head of regional agency at Strutt & Parker, commented: “Outside London we simply haven’t seen a property market like this since 2007. Block viewings, best & final offers and sealed bids have been common place in the hottest markets and to think that this activity continues in the midst of a global pandemic is completely astounding. Back in October when the market was flying, very few anticipated the run to last but this quarter we have been arguably busier. We still continue to register new applicants at an unprecedented rate.

“The extension to the stamp duty holiday was welcome news to those who had an offer accepted, but were worried about meeting the deadline, and undoubtedly helped motivate additional buyers to enter the market. However the main challenge we are now facing is a lack of stock, in fact we are roughly around 36% down YoY – a challenge that the industry is facing as a whole and will lead to additional competition and increased pricing. But with the success of the vaccine roll out and people feeling more comfortable, we do expect more vendors to now come to the market.

“While we anticipate activity to slow down in Q4 following the end of the Stamp Duty holiday and furlough, I expect that the desire for bigger homes in the countryside to accommodate new patterns of flexible working will be here for many years to come.”

Strutt & Parker has retained its forecast for the Prime Central London (PCL) market, estimating a best case of 5% growth in 2021 and a worst case outcome of 0%. In Q1 2021, total sales transactions in PCL recovered to the highest number seen since Q1 2016. Y-o-Y growth was 29% and QoQ growth was 12%. However, total PCL transactions in Q1 2021 were still only 68% of the previous peak in Q4 2013.

Louis Harding, head of London agency at Strutt & Parker, added: “Reports of the death of the Prime Central London residential sales market have been overstated. While price growth was flat across 2020, Q1 2021 total sales transactions in PCL recovered to the highest number seen since Q1 2016. And while price growth and transactions might not compare to what our colleagues are seeing in our regional business, for a market that traditionally relies heavily on international buyers who are still restricted to travel, these positive signs are very encouraging.

“Demand from domestic buyers has more than filled the gap left by international purchasers, removing the uncertainty around the impact the restrictions are having in this respect. Unsurprisingly, after buyer’s experiences last year, family homes with gardens and additional space are the hottest property here, especially in the likes of leafier Kensington and Notting Hill. We are encouraging buyers to act now rather than wait and face additional competition from international buyers when travel restrictions are lifted.

“Although some uncertainties still remain; real unemployment numbers once the furlough scheme ends and how company office policies on home working after June could impact the market, we are very positive about the outlook. London will continue to be highly regarded globally as a place to live, work and learn and play, but let’s also not forget that property here represents good value, relatively speaking, with prices still circa 20% down on their 2014 peak.”

In terms of lettings transactions in PCL, Q1 2021 saw 132% growth on historically low Q2 2020 levels. However, there is still some considerable market uncertainty given the wider economic outlook. In the year to Q1 2021, prices declined by -8.3%. Q-o-Q change was -1.4%. The outlook for PCL lettings remains negative as market activity has been low.

Vanessa Hale, head of residential research and insights at Strutt & Parker, said: “While our headline forecasts remain unchanged from the previous quarter, the strength of 2021 sales has moved sentiment from one of cautious optimism to outright positivity. The market is at some of its strongest levels ever seen in terms of price and transactions, although stock is low in the regions.

“However despite the positivity experienced so far this year in the property market, the threat of COVID-19 and its impact is by no means removed. There is still global economic uncertainty around the pandemic and in the UK, despite the success of the vaccine roll out, uncertainty remains over what happens to unemployment rates once furlough comes to an end and also how the future of office working may look – both of which could impact buyer behaviour.”


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One Comment

  1. paulgbar666

    The property market needs to be differentiated.   There is the housing market and the flat market. Houses are going like hot cakes. Flats AREN’T selling for obvious reasons. Until Govt is prepared to pay initially for all the outstanding remediation costs then flats will remain unsaleable.
    Those costs are about £50 billion!!  Only a fool would buy a flat unless the block has been fully remediated with a valid and legal EWS1 form.    


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