Property Market Monitor: December 2021

According to the Nationwide House Price Index, the price of a typical UK home grew by 10% year-on-year in November, a touch higher than the 9.9% recorded in October (on a monthly basis, prices grew by 0.9%, up from 0.7% a month earlier)^[i]. Data shows that house prices have been growing by and above 10% every single month since May (chart of the month) and last month exceeded £250,000 for the first time. However, there have been some signs of cooling in housing market in recent months. For example, despite the fact that housing transactions so far this year have already exceeded the number recorded in 2020 with two months still to go (data to the end of October), transactions declined by almost 30% year-on-year in October. But according to Robert Gardner, chief economist at Nationwide, this slowdown has been inevitable given the Stamp Duty holiday expiry at the end of September, which gave buyers a strong incentive to bring forward their purchase to avoid additional tax on their purchases^[ii].

Chart of the month: Monthly UK house price, annual % change

Source: Nationwide House Price Index, Blend Network

Market Commentary

According to the Nationwide House Price Index, the price of a typical UK home is now £37,000 higher than it was before the pandemic in January 2020, that’s 17% growth in the price of an average home^[iii]. So far this year, average house prices are up by almost £22,000 (or 9.4% year-to-date), close to the average annual salary in the UK^[iv].

According to the latest property transaction data released by HMRC, UK residential transactions saw a dramatic decline in October: the volume of residential transactions was down by nearly 30% year-on-year in October (down by over 50% if we compare October with September this year)^[v]. In addition to the Stamp Duty holiday argument, inflation is being put forward as another reason supporting higher house prices^[vi].

According to the last PMI data, the UK’s construction industry hit its strongest pace in four months in November after a slowdown caused by global supply chain problems and labour shortages. Meanwhile data showed soaring inflation pressures abated^[vii]. Commercial building led the way as a recovery in the economy led to new projects and infrastructure work also helped to offset a slight slowdown in housebuilding^[viii].

At Blend Network, we are seeing a steady pipeline of new development loan enquiries. For example, we recently funded the second and last tranche of a £1,100,000 GDV loan to develop a site with locked-up garages into six new houses in Stoke-On-Trent^[ix].

Property Market News & Data

The latest data from the Association of Short Term Lenders (ASTL) shows the bridging market continuing to deliver strong growth in Q3. Figures show bridging pplications reached a record high of £7.72bn in Q3, an increase of 4.9% on the previous quarter^[x].
New research by Savills commissioned by LDS Sales Guarantees reveals there are more than 135,000 homes in the development pipeline on house-led sites for SME developers in England and Wales, with a latent development value of around £40bn. The proportion of homes built by SMEs has fallen from 39% to circa 10% since 1988^[xi].

According to Capital Economics, “limited supply and robust demand will ensure competition between buyers remains intense, driving up house prices further. That said, rising mortgage rates will put the brakes on house price growth further ahead”^[xii].

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Data found in this article are the property of the sourced information. Whilst every effort has been made to ensure this data is correct, Blend Network cannot guarantee there are no errors in the sourced data.

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[i] Source: https://bit.ly/3Ionglz

[ii] Source: https://bit.ly/333xAPX

[iii] Source: https://bit.ly/3Gf9PTi

[iv] Source: https://bit.ly/3Gf9PTi

[v] Source: https://reut.rs/3EsSEgl

[vi] Source: https://reut.rs/3EsSEgl

[vii] Source: https://bit.ly/3HrsYmz

[viii] Source: https://bit.ly/3dmo1NJ

[ix] Source: https://bit.ly/3dqDKve