Wednesday property news update - 3rd February 2021
House prices taper, mortgage lenders take a breath and major economies adapt to the pandemic
3 minutes to read
The taper begins
UK house prices declined 0.3% in January, reflecting falling demand ahead of stamp duty holiday cut off at the end of March, according to Nationwide. This is the first monthly decline since June and caps the annual growth rate at 6.4%.
We expect this pattern to remain in place amid the prevailing lockdown, the approaching SDLT deadline and the end of the furlough scheme, however the continued successful roll out of the vaccines and mounting evidence of an impending consumer-led economic recovery will underpin the market as the year progresses. Our current forecast has UK house prices ending this year flat, based on an assumption the prevailing restrictions remain in place until March.
The prospect that restrictions may be lifted sooner rather than later were given a boost yesterday when an Oxford University study confirmed a single jab of its vaccine significantly reduces transmission.
The lenders take a breath
Mortgage approvals data from the Bank of England also registered a slight slowdown, with 103,400 loans approved for house purchase in December, down from 105,300 in November.
That caps a rollercoaster year for the mortgage market. Banks approved 818,500 loans for house purchase in 2020, some 30,000 more than the previous year. That is more loans than any year since 2007 despite a market shutdown that saw approvals crash to just 9,400 in May - about a tenth of December's total.
Lending conditions including both rates and lead times are now improving - it appears the banks managed to get through stacks of applications over the Christmas period, Hina Bhudia tells the Mail.
Holding patterns in central London
House prices in prime central London declined 4.3% during the year to January amid the prevailing restrictions on travel, writes Tom Bill. That figure has remained steady for three months, suggesting house prices are broadly flat for the moment.
The data reveals the differing reliance on domestic and overseas buyers across various markets. The spread between the annual price growth in Greater London (9.6%) and PCL (-4.3%) in November was 13.9 percentage points, underlining the extent to which domestic demand has sprung back in the capital.
All this means any impact on prices by the April introduction of the 2% stamp duty surcharge for overseas buyers is likely to be muted. As Tom puts it neatly - the absence of international travellers means we are in the unique situation of having a stamp duty surcharge that is largely baked into the price before it is introduced.
Supply pressures
Average rents in prime central London fell 13% in the year to January amid high levels of supply.
A high number of properties switching from the short-let market has been a feature of the lettings market in the capital since the pandemic, which has been exacerbated during moments of tighter lockdown restrictions. The number of market valuation appraisals rose by 63% versus the five-year average in January, highlighting how supply levels continue to rise.
Eco green shoots
Major economies are adapting to the pandemic as the crisis progresses - we covered the IMF's upwards revisions of its global economic forecasts last week.
The US economy will return to its pre-pandemic size by the middle of this year, even if Congress opts to reject any more federal aid for the recovery, according to the Congressional Budget Office. Officials tell the New York Times that the brightening outlook was a result of large sectors of the economy adapting better and more rapidly to the pandemic than originally expected.
Meanwhile, the eurozone economy shrank 0.7% in the final quarter, outperforming expectations of economists tallied by the FT of a 1.3% decline, and the European Central Bank's own forecast of a 2.2% contraction.
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