The calming of the UK property market, after the rush to complete purchases before the June 30 stamp duty deadline, makes now an ideal time to take stock of how the London market is performing compared to the rest of the country.
Looking at a selection of the most recent trackers of UK property prices, the indications are that the record price growth of the last few months is beginning to slow. Although both the Halifax and Nationwide House Price Indices for August record new record highs for UK house prices, the rate of increase is down. According to the Nationwide, annual house price growth rose in August to 11.0%, but that was only 0.5% up from the July figure of 10.5%.
The Halifax HPI puts the annual rate of house price inflation in August at 7.0%, down from 7.6% in July. The Zoopla UK House Price Index for July also shows a small fall in annual house price growth, down from 6.3% in June to 6% in July. Finally, the most recent government ONS UK House Price Index shows that house prices rose by 8% in the year to July 2021, down nearly 5% from the June figure of 13.1%.
However, the rate of growth in London property prices is still lagging behind the rest of the country. According to the ONS figures, London continues to record the smallest annual growth of 2.2% in July, down from 5.1% in July. The Halifax report puts London prices up just 1.3% in the year to August, which is the smallest increase seen in the last 18 months. They also report that London is the only region in the UK to have seen a fall in prices over the last three months, although this was only by 0.3%. The Zoopla figures for the capital are a little more optimistic recording an increase of 2.3%.
Outside London, the lack of housing stock for sale continues to be a factor driving price growth. Zoopla calculate that housing stock is down by 26% compared to this time last year and attribute this to a variety of factors including unusually high rates of market activity, an increase in first-time buyers due to lower interest rates for high LTV mortgages and finally an 11% reduction in the number of new homes built in the year to March 2021 because of the effect of lockdown on the construction industry. The resulting imbalance between supply and demand means that UK homes are selling in an average time of just 26 days, compared to 42 back in 2016.
In London, however, properties take significantly longer to sell, which reflects the better supply of homes. Flats are in ready supply and remain the hardest type of property type to sell, taking on average 124 days, according to figures released by Home. co.uk. Semi-detached and terraced homes are quicker to sell, but these still need 82 days on the market, nearly a month longer than this time last year. Detached homes are the only property type in London selling more quickly this autumn than last.
Turning to the rental market, Zoopla report a significant return of demand in the UK’s cities as the economy reopens and students look for accommodation ahead of the autumn term. Annual rental growth outside of London stood at 5% at the end of July, which is the largest increase since the Zoola index began thirteen years. Zoopla report that, with demand up 19%, but supply down 13% in the year to August, the existing supply demand imbalance in rental property is accelerating.
In the rental market, London is bucking the national trend once again. The capital remains the only area in the UK with negative rental annual price growth, with Zoopla recording an annual decline of 3.8% across the whole of the Greater London area. However, this compares with a fall of 9.8% in the year to February and Zoopla feel confident that the decrease in rental prices has now bottomed out. Indeed, rents in the inner London boroughs rose by 2.3% in the three months to July, indicating that Central London is starting to experience the same increase in demand seen in other city centres.
“In the rental market, London is bucking the national trend once again. The capital remains the only area in the UK with negative rental annual price growth, with Zoopla recording an annual decline of 3.8% across the whole of the Greater London area.”