House prices grow 6.6% over 2020: Rightmove

Featured in Financial Reporter

2020’s unanticipated housing market momentum sees asking prices finish 6.6% up on 2019, despite a fall of 0.6% this month, according to the latest Rightmove house price index. Rightmove is now forecasting 4% national average price growth in 2021, though price rises for newly marketed properties are expected to rise at a slower pace than this year. Its data shows that despite the impending stamp duty deadline, around 130,000 sales were agreed over the last month, up by 44% on the same period in 2019.

Last month, Rightmove reported that there were 650,000 sales agreed and in the pipeline, many of which are aiming for completion before 31st March to qualify for stamp duty savings. One month on, and a month closer to the deadline, Rightmove says the figure remains at around 650,000 because 130,000 additional sales have joined the processing logjam and replaced the 130,000 completions or fall-throughs that have taken place in the last month. Some completions are already projected to be delayed until April next year, especially where there are search delays, legal issues or complex mortgage applications.

After Q1, Rightmove is predicting a slower second quarter, but says cheap mortgage rates "leave scope for further modest price growth despite the loss of the tax saving". Its figures show that all regions have seen far greater average price increases than the average savings in stamp duty, indicating affordability headroom.

Demand has exceeded supply in 2020 with the number of properties coming to market for the year to date down by 0.6% on the same period in 2019, and the number of sales agreed up by 8.3%. As a consequence the number of available properties for sale is at a record low, indicating scope for some further modest price increases overall in 2021, despite ongoing uncertainties.

Tim Bannister, Rightmove’s director of property data, commented: “2021 has a lot of variables, and so is not an easy one to call, but with Rightmove’s unique leading indicators of buyer and seller behaviour we are confident that the housing market will continue to outperform general expectations next year as it did this. Our 2021 forecast of a 4% price rise is more conservative than the unsustainable 6.6% national average seen this year. There’s likely to be a lull in quarter two unless the stamp duty holiday is extended, but for many buyers its removal will not be make or break, though may lead them to reduce their offers to a degree to compensate for the higher tax, and indeed many sellers may be prepared to help to mitigate their buyer’s financial loss. First-time buyers will remain largely exempt, so in most cases will be no worse off. The maximum savings of £2,450 in Wales or £2,100 in Scotland are considerably less decisive than the £15,000 available in England for a house costing £500,000 or more, which does however only apply to a small part of the market.

“Despite these headwinds, ongoing demand still remains very high, indicating that there’s plenty of fuel left in the tank for the housing market. Interest rates remain at near-record lows, and we expect greater availability of low-deposit mortgages at competitive rates next year. These two factors will help to oil the wheels for home purchases by the ‘accidental savers’ who have collectively saved £100 billion that they couldn’t spend during the pandemic restrictions. With the expectation of a return to more normality in the second half of 2021 and a likely ‘fresh start’ mentality for some, there are sound reasons for continued positive market sentiment that will outweigh the economic, political, and health challenges ahead. Rural, countryside, and coastal demand will remain high for those re-appraising their lifestyle, but more normality will also help the recovery of those aspects of city-living that have seen a dip in their appeal.”

Ben Taylor, CEO of national estate agent Keller Williams UK, said: “A marginal decline in asking prices may come as a shock given the steep upward growth of recent months, but even in extremely hot market conditions momentum starts to wane as we approach the Christmas break. You only have to look at the annual increase in asking prices to see how much stronger the market is now compared to last year and no one would have predicted that back in March.

"This easing of upward pressure will no doubt be welcome by aspirational homebuyers. That said, while this inflated level of market activity will, of course, start to dwindle ahead of the March deadline, the foundations have bee laid for a year of slower but stable price growth.

"We’re now looking at a return to pre-pandemic market normality once the stamp duty holiday does expire, rather than a house price nosedive and this miraculous return to form is yet further proof of the resilience of the UK market.”