Published: 29/04/2021

The housing market; what are the vital signs telling us?

As the latest Acadata index shows (, prices in March were rising by around 10% on an annual basis, prompting renewed talk of housing bubbles which might be about to burst. Given that our index is based on completion prices, a glance at our comparison of indices table  below would suggest that- taking mortgage approval prices (Halifax and Nationwide) and asking prices (Rightmove) as crude forward indicators- we have at least several more months of continued price increases built in.

There are inevitable caveats -the Acadata index is based on mortgage and cash sales, unlike the mortgage approval price data, so this is at best an approximation: and similarly both these prices and asking prices are subject to considerable change during the life of the transaction when the market is under such pressure.

So although there are semblances here of a housing bubble, there is little likelihood of it bursting in the immediate future. However, come the end of  the Stamp Duty holiday  (from July)  and the furlough scheme (end of September) the economy- and the housing market in particular- will begin to be more fully exposed to reality. This will include seeing more repossessed homes coming back onto the market, itself a potential further dampener on prices.  

Counterbalancing that of course is the likely stimulus to demand from the recent arrival of the government backed loan guarantee scheme – this will directly bring more 95% lending to the market and it has already stimulated a number of other lenders to come back into this market using their own schemes. The Times (24/04/21) suggested there were five 95% LTV loan products on the market in March, but over 100 in late April.

It will be in the fourth quarter of the year when we begin to really see how this will all work out. Setting aside further stimulus measures, we still face the problem that demand has been stronger than supply. In the short-to-medium term this is not about new homes being built but in part about more households being willing to trade. Lockdown has encouraged many to “stay at home”  and this includes being more reluctant to move. At the same time there have been a significant number of households  (perhaps the more affluent?) who have upped sticks and taken part in the so-called race for space -boosting the demand for bigger homes and those in better (more spacious) locations. 

Some have also sold up and moved into rental homes just to make the move, creating a potential “rapid response” reservoir of demand to return to the market when the conditions are right. Alongside them are then the buyers who are not sellers. Clearly first-time buyers are in that category, and their activity has been boosted by government measures. But so too have landlord purchases taking advantage of the SD holiday, with a suggested 25% of transactions being in this category. In retrospect, it might have been sensible to exclude landlords from the holiday.  Little wonder then that demand is outstripping supply.

Transaction numbers have gone up sharply (March’s figures for the UK record a massive surge – up 60,000 on February to 180,690), but of course much of this is the short-term effect of coming ever-closer to the end of the SD holiday. What we need, if we are to avoid more price pressures is for more homes to be put on the market, alongside continuing new build supply. Time will tell if households are confident enough in their jobs and incomes and in the wider social and political environment to return to putting their homes on the market. Many have chosen to upgrade “in situ” which of course has the further longer-term effect of distorting the housing market ladder by taking out say two- or three-bed homes and replacing them with three- and four-bed homes. Once the SD holiday ends and we see the extent to which purchases have been brought forward by owners and landlords, and the various stimulus measures have fallen away, we will have a better sense of the underlying market in a post-covid world. A new reality will dawn, the shape of which is still a little difficult to predict?  

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