Property consultancy Strutt & Parker launches its quarterly house price forecast, doubling its previous quarter prediction of 5% best-case scenario growth in 2021 for the UK to 10%, with a downside risk of 5% growth.
- Latest report doubles previous UK house-price forecast of 5% to 10% for 2021
- Best-case scenario price growth for Prime Central London remains at 5%
- Consultancy also upgrades UK and Prime Central London five year forecasts to an upside of 35%
Property consultancy Strutt & Parker today launches its quarterly house price forecast, doubling its previous quarter prediction of 5% best-case scenario growth in 2021 for the UK to 10%, with a downside risk of 5% growth. The best-case scenario growth for Prime Central London (PCL) this year remains at 5% growth. The consultancy has also upgraded its five-year forecasts, estimating price growth in the UK of between 20% and 35% (previously 15% and 25%) and in PCL 15% to 35%.
According to the Nationwide House Price Index (NWHPI), UK property prices grew by 10.3% in the 12 months to Q2 2021, exceeding the growth in the year to Q1 2021 (6.3%). On a regional basis, the best performers were Northern Ireland (14.1%), Wales (13.3%), and Yorkshire & the Humber (13.0%). Scotland saw the lowest positive growth at 7.0% and no regions saw negative growth. For London, year-on-year growth was comparatively low at 7.2%, making it the 2nd lowest performing region, although the latest gains still represented positive change compared to previous quarters.
The outlook for PCL lettings is improving slightly with more activity reported in the market by agents. However, a lack of stock and the inability of international renters to partake in the market is impacting prices. Restrictions on landlords have made the rental market less attractive. In terms of lettings transactions, Q1 2021 and Q2 2021 saw 132% and 155% growth (respectively) on historically low Q2 2020 levels. However, there is still some considerable market uncertainty given the wider economic outlook.
Guy Robinson, Head of Residential Agency at Strutt & Parker, said: “The demand for new ways of living will drive the market for many years to come. With the market performing so strongly this year, the main question on everyone's lips is how long will this continue for, especially now that the Stamp Duty Holiday is being phased out? And while we are not maintaining the pent-up activity levels of earlier this year, our agents continue to register record number of applicants and we still see high demand. Some might have thought that activity would have ‘fallen off a cliff ‘when the tax incentives stopped, and while it might have impacted some people's budgets at the lower end of the market, if you remain determined to move you will do so.
"The market is however, undoubtedly quieter, which is typical across the summer months. So, while there was no seasonality to the market last year, we anticipate it will return this year as the market continued to be open during the pandemic and many have looked forward to taking a holiday across July and August, with a return to stronger levels in September. As with all markets, the property sector is based on supply and demand, the continued imbalance here in some of the hottest markets will see prices continue to grow. When vendors look to sell in September there might be a softening to some price growth, but strong levels of activity will not ease altogether, and properties may considerably outperform house price predictions both this year and in many to come.”
Louis Harding, Head of London Agency at Strutt & Parker, comments: “The best days of the Prime Central London market are yet to come, and actually might just be around the corner. While activity levels here have been strong and have outperformed many predictions, we have not yet witnessed the record high our counterparts outside of the capital have seen. Even though there is, and has been, a lack of international buyers who form a key part of the Prime Central London market, domestic buyers have come to the market and maintained activity in their absence.
“In Prime Central London there are three lanes of traffic. The fast lane is the family housing market: where there has been a gravitation towards extra space both internally and externally off the back of the experiences of the past 18 months. The middle lane is the flat market that was slow last year, but is beginning to pick up pace now, and is showing signs that it is a lot more rejuvenated. Then there's a slow lane of the discretionary market which is driven largely, but not exclusively, by international purchases. Here there are people who are purchasing non-primary residences, where it's a more of a ‘want’, rather than a ‘need’.
“There's still a huge appetite for Prime Central London among overseas buyers, but many remain nervous about travelling and are unlikely to do so until there is more certainty around COVID-19. But they will return once they are comfortable and confident, and this is when we could see the market in London really take off again. It's less a case of if, it's more a question of when.”
Kate Eales, Head of Regional Agency at Strutt & Parker comments: “June saw the tapering off of the Stamp Duty Holiday and its associated benefits. As such, we saw a huge amount of activity in terms of the number transactions being pushed through before the deadline. While we are not expecting the same impetus the ‘holiday’ created to continue, we are still registering record numbers of buyers, and we believe the market will be robust for the rest of the year fuelled by the motivation to switch up lifestyles off the back of the events of the past 18 months. This coupled with the lack of properties on the market will mean that house price growth will at the very least be sustained, and in some cases, will continue to grow.
“Over the summer months we will see a return to the seasonality of the market that we didn't have last year due to the impetus created by the first lockdown restricting people’s ability to move. We anticipate this summer to be slightly quieter than the second quarter as people take advantage of the ability to travel for the first time this year, whether in the UK or abroad, before activity levels return in September.
“That being said, certain parts of the market are maintaining the previously unseen activity levels that we witnessed in April and May. Homes for sale, outside the Capital, between £500k and £700k continue to be the highest in demand and are still seeing a frenzy of viewings and offers.”
Vanessa Hale, Head of Residential Research and Insights at Strutt & Parker, comments: “The continued strength of Q2 2021 sales has maintained the positive sentiment that came to fruition in the previous quarter. Growth would have to be flat for the rest of the year in order to see annual growth of just 5% - the previous best-case forecast. However, the continued lack of stock combined with demand are expected to lead to further price rises, albeit at a slower rate than this quarters’ results. This is partially due to the end of the Stamp Duty Holiday and a return to the seasonality of the property market, which was not seen in 2020 because of lockdown.
“Despite the positivity experienced so far in 2021, the threat of COVID-19 and its impact on the market is by no means removed. There is still global economic uncertainty around the pandemic. In the UK, uncertainty remains over unemployment and the return to office working, all of which could impact buyer behaviour. However, this increased activity is expected to continue for years; as there has been a permanent shift in behaviour and lifestyles, and the market will take time to adjust to that.”
Read the latest quarterly report here.