The recent House Price Index by Rightmove shows that house prices rise again sharply, after a slowdown in recent months.
The monthly rise in property prices in February is the biggest jump in more than 20 years, with a massive average monthly increase of £7,785 or 2.3%. This means house prices have risen by 9.5% from last year, which is the biggest yearly rise in house prices since September 2014.
But why do house prices rise again? Well, Rightmove suggests that buyers as well as sellers react to a fear of missing out, due to the current competitive market.
High demand and a shortage of available stock are supporting a rise in prices and a new record average asking price this month.Tim Bannister, Director of Property Data at Rightmove
Last year, the rise in house prices was driven by an increase in first-time buyers. But now it’s the second-steppers that are responsible for the price hike. These are the buyers who are looking for more space and are ready to move on from their first house. The average house price in this category rose by 2.9%, compared to 0.5% for first time buyer homes and 0.1% for top of the ladder properties.
More Enquiries Means House Prices Rise Sharply
The number of enquiries from buyers to estate agents has increased by 16% compared to the previous year. So the pandemic-driven urge to move has not yet abated.
In London, agents have seen a 24% increase in enquiries from potential buyers. While the initial drive to move was directed away from cities, with buyers wanting more space, they are now returning to the cities or at least commutable distances from cities.
London has suffered the most at the start of the pandemic, but is now seeing its biggest annual growth rate since 2016, with 7.3%. The average house price in London is now £667,001.
In January, Rightmove reported an increase in requests for valuations by 11%. These valuations have now translated into new houses coming onto the market, with new listings being up by 11% compared to last year. This welcome increase provides the market with more fresh choices and might be a sign of a return to a more balanced market.
House sellers will be pleased to know, that March is traditionally the strongest month to sell, with the highest number of enquiries in the year. It will be interesting to see if this will continue this year.
How Does It Look In The Rest Of The Country?
In the rest of the UK, Scotland has seen the biggest monthly increase, with 7.5%, which means the average property price has risen to £174,567. The South West and the East Midlands have seen the lowest monthly growth with 0.4%. However, both regions still have year on year growth of over 13%.
In England, Yorkshire and Humber is the region with the biggest monthly price rise of 6.2%, so that the average house price now stands at £228,267.
In such a competitive market, houses are snapped up quickly. In Scotland, it takes on avareage only 34 days to sell a house. In comparison, in London it takes 68 days.
Since January 2021, the time it takes to get an offer has steadily decreased, but with more properties coming on the market, there are signs that properties will stay on the market for longer again. Nationally, it takes currently on average 44 days to sell your home.
How Buyers And Sellers React
Because house prices rise sharply again, buyers and sellers adapt their behaviour to stay ahead in this competitive market.
Many potential buyers have moved away from the practice of looking for a house first and then putting their own home on the market. Estate agents have reported many cases where buyers have missed out on a property, because they were not in a position to proceed and were beaten by another buyer.
The 11% increase in listings shows that many sellers, most of whom will also be buyers, are trying to put themselves in the best possible position to get their next dream home.
It seems that the fast-moving market has really hit home for sellers this month, with a number of those who are also buyers putting themselves in the best position to secure their dream home by becoming a ‘power buyer’ and getting their own home on the market first. This in turn is driving a rise in new listings compared to last year, giving the existing pool of buyers some fresh choice.Tim Bannister, Director of Property Data at Righmove
So for the time being, this is still a seller’s market until more properties are available for sale. It is likely that house prices rise further in future, but there are signs that the market will slow down and become better balanced.
If you are considering getting on the property market or need a reminder about the process of buying a property, read our article explaining the process of buying a house.