UK house price growth underpinned by resilient demand and low supply
Conditions may normalise as demand declines and supply is boosted by the arrival of spring.
2 minutes to read
As spring approaches, there is no sign that annual house price growth is about to return to single digits in the UK.
That may take a few more months as supply builds and sky-high demand begins to fray around the edges.
Spring and autumn are traditionally the two most active times of the year for buyers and sellers but the former still outnumber the latter by a wide margin.
The gap is only narrowing slowly, as the below chart shows.
The disparity is still sufficiently large that Nationwide reported annual growth of 12.6% in February, up from 11.2% in January.
While the number of new prospective buyers was 50% higher than the five-year average in February, sales instructions were down by 5%, Knight Frank data shows. The result is house price growth that continues to raise eyebrows.
The stamp duty holiday clearly played its part in creating the current imbalance, as the chart indicates. Supply noticeably tailed off from July 2021, when the full holiday came to an end.
Since then, the re-stocking of the shelves has been erratic, not helped by the fact owners have held back due to a shortage of purchase options. It’s a vicious circle that can’t be quickly reversed but the arrival of spring will accelerate the process.
Meanwhile, there remains a large amount of unsatisfied demand in the system. This has been turbo-charged by the relaxation of Covid restrictions and the ongoing re-evaluation of how and where people live.
At some point this year that demand will begin to relent. Mortgage rates are on the rise, as we explore here in more detail. Meanwhile, the cost-of-living squeeze will start to be felt more acutely, accelerated by events in Ukraine, which is so far the most palpable impact of the conflict on the UK property market.
As we move beyond the pandemic and revert to more familiar constraints and uncertainties, spring could mark the return of more recognisable and predictable conditions in the UK housing market.