Forecast Research Residential

Residential Quarterly | Autumn 2021

Q4 2021

The current economic outlook is optimistic for the closing stages of 2021 and continuing into 2022, but the indicators are currently subject to a significant level of uncertainty as external and internal pressures may test the resilience of the UK’s path to recovery.

Vanessa Hale

Director, Research

+44 20 7318 4675
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As reported by The World Bank, the latter half of 2021 continues to show promising signs that advanced economies (including the UK) will continue on a path of well-sustained recovery, particularly for the labour markets and sectors that bore the brunt of the pandemic induced losses over the course of 2020. At the core, this positive outlook is largely based on avoidance of wide-scale national lockdowns, increased vaccine roll out, and sustained fiscal support for the vital areas of the economy, all three of which seem to have been generally maintained in the UK during the last quarter. Of course, the lasting impact of the pandemic remains a concern, especially for the labour market. Even when the health concerns of the corona virus pandemic are curtailed, the pandemic has the potential to result in persistent social and behavioural impacts, changing attitudes to travel and human interaction.

As people re-evaluated their housing choices throughout COVID-19 and the tax incentives to purchase residential property provided by the UK government were in place, the provisional UK data for Q3 2021 reflects a YoY increase of 33%. Q3 2021 also was the highest amount of recorded residential transactions for the third quarter since Q3 2007 when the UK registered 442,930 transactions.

Across the regions, activity in 2021 has surpassed 2020 transactions, as the housing market was able to operate under relatively normal measures. In Q2 2021, agents had reported that market activity remained very strong as transaction levels continued to gain momentum during the first half of the year. Since then, market activity has slowed down from a transaction standpoint, with agents reporting a chronic shortage of stock accentuated by the difficulty for developers to build in the pandemic. In Q3 2021, this stock shortage has meant that sustained demand from buyers and renters has been unmet.

PCL sales index data for Q3 2021 recorded QoQ growth of 0.7%, slightly higher than Q2 2021 (0.1%). YoY growth to Q3 2021 was 1.2%. This is the first time YoY growth has been above 1% since Q3 2014, however prices still remain circa 20% down from their 2014 peak.

In contrast, Q3 2021 sales transactions for PCL properties were unable to sustain or build on the record set in the previous quarter. QoQ transaction levels decreased by 44%, halting the positive growth that was recorded in the four previous quarters (Q3 2020 to Q2 2021).The decreases were driven by the <£2m price bracket, which saw a decline of54% in transactions compared to Q2 2021. This price bracket would have been more positively impacted by the stamp duty holiday, so it follows that the decreases are the largest for this group. YoY growth on the other hand was positive, albeit at a minimal rate of 6%. This was driven by 60% YoY increase in the >£5m bracket. The QoQ contraction in PCL transactions may be an indication that the market is cooling down after consecutive periods of high buyer demand, which may have been propped up by stamp duty tax incentives that have now ended. Total PCL transactions in Q3 2021 were still only 51% of the previous peak in Q4 2013.

Click here to read the full Q3 2021 Residential Report.