Jump In Buyer Demand And House Prices To Continue For Time Being

The housing market has experienced another upbeat month thanks to the chancellor’s extension of the stamp duty holiday and the introduction of the 95pc mortgage scheme.

According to the latest Royal Institution of Chartered Surveyors (RICS) survey results, buyer enquiries, agreed sales and house prices have all gained noticeable momentum as a result of the stamp duty holiday extension, as evidence points to the renewed impetus being sustained over the short term.

While sales and new instructions all increased markedly compared with February, activity in the sales market rose strongly in March. Although a gradual easing in lockdown restrictions is also considered to be contributing to the growth in activity, survey respondents emphasise the extension of the stamp duty holiday as an important factor underpinning the renewed momentum.

Nationwide, 42pc of those surveyed reported an uptick in new buyer enquiries during March. This represents an increase from zero previously and heralds the strongest comeback since September last year. Concurrently, new instructions coming onto the market also picked up, though the pace of growth was insufficient to match the rise in reported demand.

In fact, an issue common to many of the comments left by respondents is that demand is outstripping supply and more new instructions will be required to balance the market in future. In this regard, 29pc of interviewees stated that appraisals had increased compared with the -19pc reported in February last year, which suggests more new instructions should enter the pipeline in the next few months.

Buyer demand drives house sales

Half of all contributors reported a rise in agreed sales which grew robustly in March, indicating a rapid speeding-up compared to the 7pc recorded in February and the most compelling result since August last year.

As for future prospects, a remarkable 35pc have favourable expectations of near term sales, up from 9pc in February. And with sales expectations positive across all parts of the UK, the near term sales outlook is now the most bouyant since January 2020. Furthermore, the hike in sales is predicted to be concentrated over the next few months, as the expectations for the next twelve months are consistent with more subdued growth in sales.

Where house prices are concerned, 59pc of those questioned pointed to an increase nationally compared with the latest survey period. This measure has climbed a little in each of the last two months, albeit the latest yardstick is still slightly below the recent peak of 66pc posted in October last year.

According to reports, prices are rising across all countries and regions of the UK, with the most powerful impetus recorded by those in the North West, Yorkshire & the Humber, in addition to Northern Ireland. Prices are expected to continue on a steady upward course over the next three months, due in main part to the recent excess of demand over supply.

At the headline level, 42pc of contributors expect prices to rise further in the short term, up from 16pc previously. At the twelve-month mark, 60pc of participants nationally look forward to higher prices in one year’s time, a jump from 46pc posted in February. Twelve-month price expectations are now signalling substantial growth across all parts of the UK, led by especially high figures in Scotland, Wales and Northern Ireland.

Buyers need to consider affordability

Rich Horner, Head of Individual Protection at Metlife, states that it has been another positive month for the housing sector, due to the chancellor’s extension of the stamp duty holiday and the introduction of the 95pc mortgage scheme. But one that could have suffered badly if the stamp duty holiday had ended abruptly.

In the coming months, he believes, we should continue to see a surge in home ownership, especially as the new 95pc mortgage scheme will make buying a home a reality for more first-time buyers. Additionally, more lenders are offering their own competitive mortgage deals.

However, despite the success of these measures, Horner warns that potential buyers need to be aware of affordability and ensure they don’t live above their means, particularly as homes up to the value of £600,000 are eligible under the scheme. If this were to occur, he says, house prices could continue to rise and, bearing in mind the scheme is accessible to all types of buyers, first-time buyers could be locked out of the market altogether.