House prices still soaring as lack of supply sees homes selling over asking price

House prices: Expert discusses 'interesting' pricing differences

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While mortgage costs have risen with two Bank of England rate hikes, demand for property is still continuing to remain strong, and ahead of supply. Nathan Emerson, CEO of estate agent trade body Propertymark, reported: “Prices remain inflated by a continued lack of stock, with our member agents reporting that the number of offers they are receiving on properties per month can be well into double figures and that sales are continuing to be agreed at over the asking price. Lack of stock is an issue across all four UK nations and some agents say they are as much as 40-50 percent down on last year. This is backed up by data in our final Housing Market Report of 2021 which showed a month-on-month reduction in the number of new instructions.

“Until that trend begins to reverse, I would not expect to see any significant dampening of property prices.”

According to Halifax’s latest House Price Index prices reached a new average high of £276,759 in January.

Annual growth remained steady at 9.7 percent year on year though the pace of growth seems to have slowed on a monthly basis rising 0.3 percent in January compared to 1.1 percent in December.

Tom Bill, head of UK residential research at Knight Frank, warned: “Don’t expect a return to more muted house price growth until supply picks up.”

Housing supply has partly been reduced by shortages of labour and building materials leading to delays in new build construction.

New developments slumped during the early stages of the pandemic and although making a comeback are still short of the government’s target of 300,000 new home a year.

While factors such as the stamp duty holiday saw surging buyer demand in 2021 the same hasn’t proved true for sellers with consultancy TwentyCi finding six percent fewer properties were put on sale during this time.

The market has also become heavily mismatched between areas of high demand and low supply.

The market for larger family homes has been particularly stretched as people re-evaluated priorities during the pandemic, opting for more space rather than proximity to work and city centres.

According to TwentyCi availability of detached homes fell -26 percent between 2019 and 2021 while flats saw a major rise in availability of 50 percent.

Mr Bill suggested the lack of homes coming to market may change though, reporting a “high level of market valuations requested by prospective sellers in January.”

He explained: “A number of prospective sellers had hesitated due to the distortive effect of a stamp duty holiday and a global pandemic”, adding “This year could see high demand more evenly matched by supply.”

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Last week the Bank of England announced a further increase in the base rate to 0.5 percent with markets now widely thought to be pricing in further increases this year.

While this is likely to have some cooling effect on the property market a perhaps bigger factor may prove to be the rising cost of living.

Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, said: “The looming threat of an incredible £693 hike in energy prices in April, coupled with tax hikes, and the rising cost of everyday essentials like petrol and food, means we’re worried about making ends meet as it is – let alone stretching ourselves to move up the property ladder.”

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