The third national lockdown has created a ‘perfect storm’ for the property market, with a slowdown in the flow of new supply for sale as demand rebounds, according to the latest house price index by Zoopla.
Record COVID cases and calls to uphold social distancing appear to have made some would-be home sellers reluctant to list their property for sale, according to Zoopla.
In the first weeks of 2021, the flow of new homes coming to the market for sale was 12% lower than 12 months prior.
Zoopla believes that falling case numbers and the easing of restrictions, or a return to the tier system, will unleash pent-up supply.
By contrast, buyer demand for property has rebounded after the Christmas break, growing even faster than at the start of 2020.
In the period to the 17 January, demand for homes is 13% higher than the same period a year ago when the market had started to rebound in the wake of the General Election.
New sales agreed are also running 8% higher than last year.
Increased buyer appetite over H2 2020 has been largely attributed to stamp duty relief, but Zoopla suggests that it is more than the deadline motivating home movers.
The strength of the sales market in this period saw 47% more sales agreed than the same period in 2019.
At the start of 2021, the total number of homes for sale is 6.4% lower than a year ago.
If sellers remain cautious and supply scarce, the choice for those in the market will be limited which will continue to push house prices higher, according to Zoopla.
Despite the impact of third lockdown on new supply, house prices have reached an almost four year high at 4.3%.
At a country level, Wales is the fastest growing market with prices rising at 5.4% year on year.
At a city level, Liverpool is growing fastest with house prices 6.3% higher than a year ago, representing its fastest rate of growth for 15 years, since before the global financial crisis.
Manchester is close behind with a growth rate of 6%, returning to levels of inflation last seen two years ago.
There are three regions where house price growth is at its highest for a decade, the North East, North West and Yorkshire and Humber, with all seeing prices currently rising between 4% and 5.5% a year.
House price growth has increased in southern regions of England but affordability pressures limit the scope for above average growth.
Prices in London are 3.1% higher over the past year but this is off the 20% annual growth rate recorded in July 2014.
More sales in the pipeline this year compared to January 2020 means the average time for a sale to complete is over the usual three months and closer to approaching four months – up by two weeks compared to the average year.
There is a risk that up to 70,000 sales agreed in 2020 may miss the deadline, and Zoopla says the case is growing for a short, month long extension to help buyers who agreed a sale in 2020 to secure the expected savings.
In a normal year, around 55% of sales agreed in January would complete by the end of the first quarter but the proportion this year is likely to be lower.
Despite the disruption caused by the stamp duty holiday, Zoopla does not expect the market to grind to a halt on 1 April 2021.
Richard Donnell, research and insight director at Zoopla, said: “The housing market momentum built up in 2020 H2 has rolled into early 2021, despite a spike in the pandemic and a third lockdown.
“Sellers are more cautious however and appear to be waiting for case numbers to drop much further before listing their home, or until we see a return to tier based restrictions.
“The strength of the market in 2020 has eroded the available number of homes for sale and this will mean continued upward pressure on house prices in the short-term.
“The most affordable parts of the UK are recording the highest rate of price growth for 10 years up to 5.4% a year.
“We still expect house price growth to slow towards 1% by the end of the year.
“The rush to beat the stamp duty deadline continues and sellers who agreed to buy a home in 2020 would reasonably expect to make the stamp duty saving.
“Delays mean we expect up to 70,000 sales agreed in 2020 to miss the deadline meaning the case for a short extension is growing.”