Demand for property has soared by 49% so far this year compared to the corresponding periods in 2018 – 2021, rivalling record demand seen during the stamp duty holiday, according to the latest Zoopla December HPI, released today.
The surge in demand has pushed up house prices to an all-time high, with the average price of a home hitting £242,000 in December, up from £216,500 at the start of 2020, the data shows.
According to the property portal, prices for houses (terraced, semi-detached and detached) now average £289,500, while flats average £175,700 – up 8.8% and 2.2% respectively year-on-year.
Demand for flats is on a sharp upward trajectory for the first time in several years, with demand outside London hitting the highest level in five years as relatively modest price increases help reignite the popularity of flats amongst buyers
Meanwhile, demand for family houses outside London is four times higher than the five-year average.
Supply appears to have turned a corner as total stock of homes for sale is 44% down on five-year average, a marginal improvement compared to the 47% decline recorded at the end of last year.
Strong buyer demand in the market pushed annual price growth to 7.4% in December, down from 7.7% in September, but still marking one of the highest rates of price growth since 2014
Geographically, the suburbs remain in the highest demand with Thurrock (Essex), and the suburbs of Birmingham, Glasgow and East London (Barking & Dagenham) all topping the list of most sought-after areas.
But despite recent increase, house price growth is predicted to slow as the housing market returns to more normal market conditions in 2022.
Grainne Gilmore, head of research, Zoopla, commented: “The effects of the pandemic on the housing market cannot be underestimated. Even after nearly two years, the pandemic-led ‘search for space’ is one of the factors creating record demand for homes this month. The market is also being boosted by office-based workers re-thinking where and how they are living amid more hybrid working models. But in some cases, as offices re-open, some demand is flowing back into city centres.
“Couple this trend with the return of international demand and the more modest prices rises in flats compared to houses over the last two years, and it’s clear why we are now seeing record-high spike in demand for flats outside London, and the highest rate of demand for flat in the capital than at any time since the end of the first lockdown.
“Just like much of 2021, the number of homes available for sale is lower than typical levels, but there are signs that the imbalance between demand and supply is starting to ease. As more potential sellers are able to find a home to move to, this will spur more supply in the weeks and months to come.”
Nick Leeming, chairman at Jackson-Stops, said: “The end of 2021 was characterised by a countryside renaissance that showed no signs of abating, with demand primarily driven by a race for space which surpassed all expectations at the beginning of the year. However as today’s results show, demand hasn’t only been limited to those seeking more space in rural locations. Demand is also rising across our cities as people once again return to offices and seek out cultural and social amenities including access to theatres, restaurants and museums.
“In London we have noted an uptick in homeowners who moved out to the countryside at the start of the pandemic, but who missed the city and have now returned. To put that in perspective, one of our London branches sold 21% more properties in 2021 than the previous year – with popularity across the spectrum, from classic pied-a-terre apartments through to large family homes.”
Tom Bill, Head of UK Residential Research at Knight Frank commented: “Demand has been unrelenting since the UK property market re-opened in May 2020. Cheap finance, high volumes of accumulated savings and a desire for more space and greenery have fuelled activity, none of which will disappear overnight.
“Apartments are also moving back onto the radar of buyers as lockdown restrictions are lifted, which has created a temporary sweet-spot of extremely high demand. As interest rates normalise, demand will calm down without going into reverse. The employment outlook for the UK is positive and while inflationary pressures are lingering longer than most people would like, there is no sense they will be permanent.
“The other factor that will usher in more normal conditions is rising supply. As Covid restrictions begin to feel irreversible, supply will increase and apply the brakes to the gravity-defying price growth seen over the last two years.”