Last year, we saw the stamp duty relief ignite the sales market but just how much did the first stamp duty holiday extension to June distort the residential property market? HMRC data shows a 62% drop in sales in July compared with June, the month that the maximum saving of £15,000 ended. Transactions in June were the highest for a single month since records began in 2005. The second highest figure was in March of this year, the date the stamp duty holiday was originally set to end. Unsurprisingly, supply and demand are still re-balancing 2022 begins.
Nationwide recorded UK annual house price growth of 10% in November. Halifax data for the month shows a similar trend, with quarterly growth at a 15 year high. This massive price growth is the result of competitive mortgage rates and tight supply, both of which we expect to reverse over the coming year. This will increase downwards pressure on prices.
Rents are now rising as rapidly as they were falling at the start of 2021. Rental value growth in prime central London (PCL) and prime outer London (POL) was 5.3% and 5.1% respectively in the three months to November. For PCL it is the highest figure since September 2010, a time when the rental market was shaking off the effects of the global financial crisis. In POL you must go back to March 2004 to find a stronger rate of quarterly growth.
Corporate demand for rental properties has surged as the economy has gradually reopened. This was exemplified by Shell’s announcement that it would be moving its global HQ to London, this is likely to drive tenant demand in the capital. Corporate demand matched pre-Covid levels in October 2021. Meanwhile, the number of new prospective tenants from all sources was 44% higher in November than the same month in 2019. With early data suggesting that the end of the pandemic is now approaching we do not expect this to change in the near future.
Lettings supply fell steeply over the course of 2021 as the many short-let properties that came onto the long-let market dried up as staycation rules were relaxed. Furthermore, many would-be landlords sold in 2021 in order to take advantage of the stamp duty holiday. The peak month in 2021 for market valuation appraisals (a leading indicator of supply) was February. The figure in November was down by 46%, underlining to what extent supply has fallen as demand surges, maintaining strong upwards pressure on rents.
In what is the highest figure since January 2019, 22% of all offers accepted in the UK in November were related to a move into London from outside the capital. The vast majority of buyers are looking for a bolthole in the capital, rather than to up sticks from elsewhere in the country, but predictions of cities’ demise due to the pandemic appear to have been wide of the mark with many offices calling employees back and many employees preferring to work from the office.