Market Insight: May 2021
Transaction volumes fall for first time this year
Since the start of 2021, activity levels in the Wirral and Cheshire West property market have seen a sharp rise month-on-month between January and March (Rightmove Intel, 2021). While this is a typical trend for the property market after a dip in November and December, the market has been further fuelled by government initiatives during the coronavirus pandemic.
Firstly, the volumes of sales being agreed exceeded new instructions in January as the original Stamp Duty Land Tax (“SDLT”) holiday was due to expire on the 31st March 2021. This meant that those in a position to buy could realistically aim to complete before the deadline, while it may have been tough for anyone not already on the market to sell within the required timescale; hence the lower new instruction levels in the first quarter.
Monthly volume of new instructions and sales agreed in Wirral and Cheshire West (Rightmove, 2020-21)
The way things were going, stock levels in the local property market were becoming scarce around February. Five consecutive months of sales exceeding new instructions was starting to cause an imbalance in supply and demand, which will have encouraged prices to rise at a higher rate than normal.
With uncertainty surrounding the strength of the property market on a National scale once the SDLT deadline was to pass, an extension was announced for a further three months with an additional three months of ‘watered down’ stamp duty until October. The impact of this on the local property market has been incredible; a huge boost of new stock came to market in March which helped address a potential stock drought.
Of course, the levels of activity witnessed over the past few months is unsustainable for long periods of time, even with an extended SDLT holiday in play. Both sales agreed and new instructions saw marginal volume drops in April, but this certainly isn’t cause for concern.
It is also worth considering that as lockdown restrictions continue to loosen, the public will be able to spend their time and money in different ways. The property market has been open throughout this most recent lockdown which facilitated transactions at a time when holidays, for example, have been off limits. The property market may cool a little once travel becomes more accessible; there’s no doubt most people will be looking forward to a holiday!
Increase in average new instruction price in April
The average new instruction price on Rightmove for property listed in Wirral and Cheshire West was £254,507 in April 2021. This represents a small 0.8% increase on March, showing that the easing in transaction levels has also brought a slow down in price increases. The average instruction price had risen over 13% from January to March, primarily caused by a shortage in stock levels.
Average new instruction price by postcode in 2021 (Rightmove, 2021)
Once the SDLT holiday extension was announced in March, there was additional incentive to market more expensive property given the significant saving available to homeowners. 23.5% of all new instructions in March and April were listed on Rightmove above £300,000 (Wirral & West Cheshire).
For property listed in January and February, only 18% of instructions listed above £300,000. This means that a higher volume of more expensive property has come to market recently and have impacted average prices as a result. The presence of higher value property in the market has provided an artificial price boost, rather than setting a longer-term trend.
Average sale agreed price by postcode in 2021 (Rightmove, 2021)
Time to sell property is quicker than usual
Of all the properties that agreed a sale across Wirral and Cheshire West in April, one in three had only been on the market for two weeks or less. Having seen transaction levels and average prices rise throughout the year, this is an indication that demand in the market is still very strong.
April 2021 sales agreed in Wirral and Cheshire West by time to agree sale (Rightmove, 2021)
Now mortgage availability has improved, aided by the Government’s 95% mortgage guarantee scheme, property is much more accessible to buyers at all levels of the market. First time buyers in particularly will benefit, and this adds further competition to the market. The good news is that supply has been much stronger in recent weeks to help cope with the additional demand, especially given how quickly new stock has been going under offer in this time.
Rental market experiences reduction in activity levels
Much focus has been on the property sales sector since the pandemic began, which is natural given the potential negative impact on the UK economy had the housing market struggled. Many landlords will have considered their options over the past 12 months, with the incentive to ‘cash in’ continuing to linger now the SDLT holiday has been extended.
Monthly volume of lettings new instructions and lets agreed in Wirral and Cheshire West (Rightmove, 2020-21)
In reality, the rentals market in Wirral and Cheshire West has struggled since the market reopened in May 2020 following the first National lockdown. Where sales activity levels saw a sustained period of growth, rentals declined both in terms of new instructions and lets agreed.
There had been a small resurgence in 2021, but another drop in April has stalled the market once again. It is typical that the volume of new instructions outweighs the number of lets agreed; the figures just appear unbalanced due to the temporary conditions of the sales market where supply and demand is much more aligned.
Average monthly rental price by postcode in 2021 (Rightmove, 2021)
The average listing price for new rental instructions has remained fairly consistent so far this year, starting at £663 in January and now £668 in April. This, of course, will vary drastically by postcode and property type, but these figures act as an indicator to how the market is performing. Demand for rental properties is still there despite the clear incentives to buy, and should see an improvement in the coming months as the SDLT holiday comes to an end.
What next for the property market?
Given the SLDT holiday will continue until the end of June, the next few weeks should provide a further injection of activity into the Wirral and Cheshire West property market. Remarkably, we have seen unprecedented levels of property sales over a 12-month period since emerging from the first lockdown in what has been a very difficult time for the UK economy.
Thankfully, it appears that the vaccination program is having the desired effect and the UK roadmap out of lockdown appears to be on track. This is fantastic news and hopefully luxuries like holidays abroad and attending live events aren’t too far away.
The impact of this on the property market is difficult to call. It could be argued that ending the current SDLT holiday on 30th June will cause a decline in activity given the lack of incentive to buy. Many buyers and sellers over the past twelve months will have accelerated plans to move house in order to take advantage of the SDLT savings on offer.
An alternate view considers the impact of a stronger economy on the property market, which historically suggests more people acquire and selling property when they have inflated confidence to do so. If all goes to plan, consumer spending should increase greatly this summer and this could, in turn, keep the property market active towards the back end of 2021.
For the time being, the property market is in a very healthy position as we look forward to the next stage in our route out of lockdown.
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