Hometrack has released its annual House Price Index Report, which expects 2021 to be the strongest year of sales and house price inflation since 2007, with £473bn of new sales agreed in 2021, £95bn higher than 2020.
The firm says: ‘This is a result of the ongoing national re-evaluation of housing, low mortgage rates and the additional boost from the extended stamp duty holiday. The strength of market conditions is not a result of the stamp duty holiday alone and greater forces are shaping the market. This is evidenced by the fact that there has been no sign of any cliff edge in demand for homes, which has continued to run 25-30% above the five-year average since the summer.
‘Demand looks set to end the year more strongly than last year and we expect this to carry into 2022. UK house price growth is currently running at 6.6% with all countries and regions of the UK registering growth rates well ahead of the five-year annual average. London is registering the lowest rate of price inflation (2.3%) and is the only regions where growth is below the five-year average with demand for homes in the capital hit hardest by the pandemic.’
But Hometrack adds that demand for homes has not been uniform over the last 18 months. ‘Our analysis shows that the mix of home buyers, and pricing of homes sold, has shifted markedly over this time. The mix of buyers is starting to return to normal as the economy re-opens and mortgage availability improves. However, there is clear evidence of slower growth in the value of homes where new sales are being agreed. This marks a turning point for house price growth, with a moderation in the rate of price inflation likely in Q4 and as we move into 2022.’
Current momentum to outweigh emerging headwinds
According to Hometrack, housing remains affordable in many markets and competition amongst lenders will remain intense, even if mortgage rates increase. Also, a continued scarcity of homes for sale will remain well into 2022, supporting headline price inflation.