As we race towards the mid year point, it is useful to look back on what has happened in the market, and take a sneak preview of what lies ahead.
The first half of the year has seen continued strength of activity and transactions in both the prime and mainstream residential property markets in the Midlands. Our estate agency team has been very active on behalf of a number of buyers, both local and from London and further afield. The demand continues to be very strong for rural properties and we expect this to continue into the second half of the year. In fairness, the market as a whole throughout the UK has been really busy, and one stat of note is that there have been over half a million transactions in the first four months of the year; the first time we have seen this figure exceeded since 2004.
For all these economics students out there, rising demand and stable supply means only one thing; house price growth. We predicted at the beginning of the year house price growth over the year of 4%. We were more positive than most others. This would now seem conservative, and although we are not revising up forecasts (like many do) we are confident this growth will be exceeded. Another stat to entertain you; the Office of National Statistics (ONS) reported that annual house price growth in the mainstream market hit double digits in March. The first time this has occurred since 2007.
Is it all a bit too rosy, a bit too positive. We don’t think so. Here in the Midlands it is not a racey market, it is not volatile. It is steady and good. The economy is growing and the Bank of England raised its economic growth forecast to 7.25% for 2021. Despite Covid and Brexit and headwinds we battle on. Most importantly, supported by low interest rates and effectively cheap money. We, and the wider financial markets, expect low interest rates to continue to underpin prices over the medium term. At the end of April, the Bank of England put the average cost of a 75% loan-to-value, five-year fixed rate mortgage at just 1.74%. Cheap money indeed.
The threat of inflation lurks on the horizon but economists and financiers much grander than us advise this is transitory, short term, and will pass in 12 months or so. Lets see. It is something important to watch as we head towards 2022 at hurtling speed. For inflation is best matched by increasing interest rates. Looking ahead the Bank of England expects the bank base rate to remain at 0.1% until Q2 2022 before gradually increasing to 0.3% in Q2 2023 and 0.6% in Q2 2024.
Perhaps the house price growth rate will fall, but that is the rate of growth, there will still be some house price growth. There is no housing market bubble. The stamp duty holiday ends June and September (for differing price brackets), the furlough scheme ends. Reality once again will bite. BUT worry not, we are confident in the wider UK residential market, and especially our favoured East Midlands market.
It is an exciting time for the property market. Our team is stronger than ever, and we have some great new members who have joined our growing team. As we have grown organically and through word of mouth we are pleased to have grown our market share and with great pleasure grown our team.
Please do get in touch to discuss any aspect of the market or your property.
The team at Osprey.