End of year house prices are not dropping as expected

The predictions of doom and gloom in the post Covid landscape and the end of the stamp duty holiday have not come to pass in property sales. In fact the property website Zoopla is reporting the annual rate of UK house price growth is at 6.9% up from 3.5% in the same month last year. So what does this mean for buyers and sellers in London and the rest of the UK?

A buoyant property market is always good news for the economy and estate agents. December is set to see a boost in sales to round off 2021 as the busiest in the property market for 14 years. Whilst we saw a drop in sales after the stamp duty holiday ended, it was in fact artificially high due to the end of the stamp duty holiday.

Shortage of homes

A factor that may have kept house prices high could be the reported shortage of homes. The continued lack of properties being listed for sale continues to push house prices up. As a result of the growing demand comes strong economic pressure as the prices keep climbing. Conversely these prices have risen faster than wages so many are simply priced out of the market.  There is another issue in that houses aren’t being built at a fast enough rate to meet the new demand for a number of reasons:

• Issues around permissions and land

• Rising population

• Changes in economic circumstances and demographics

Supply and demand is therefore a big driver of property valuation and this has not tailed off following the end of the stamp duty holiday,

Pandemic still impacting property

One of the effects of changes in the way we live through the pandemic has been dubbed as the “race for space”. Homebuyers prompted by a change in their personal circumstances are looking for properties that can facilitate working from home and bigger gardens. The fact that people’s personal needs and desires are influenced by their changed working circumstances, shows no sign of abating; although some have returned to the office, others continue to work from home. Therefore with furlough ending, the reevaluation of how people live continues as working practice has not reverted to pre-pandemic status. This lack of need to commute in some cases or indeed a change of job roles and careers has prompted many households to change properties.

Property market and the economy

Of course mortgage borrowing has dropped significantly following the end of the stamp duty holiday. These are statistics that The Bank of England uses as indicators of future borrowing and it suggests a slowing of the market which could prompt a rise in interest rates this month. Rising inflation and the possibility of higher interest rates could put a break on the market. All the other indicators discussed however are so strong that this could only prompt a pause as January looks set for a surge in properties on the market  after the Christmas holidays which will kick start 2022.