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Is the UK property market about to choke?

As prices continue to soar, why aren't sellers selling?

28 July 2021

2 minute read

With nowhere to move to, many sellers have decided against selling up. However, for those prepared to cash in on rising prices, the future is uncertain.

A severe shortage of properties available for sale is threatening to bring a previously booming property market to a grinding halt. While demand continues to outstrip supply, sellers have become increasingly concerned about a lack of supply disrupting their plans. The ratio of sold to available properties – a key indicator of supply and demand – has reached its highest level since 2002, according the latest data from the Royal Institution of Chartered Surveyors (RICS)1.

A vicious circle

For buyers, the situation is quite serious and it’s not about to get any better any time soon. Meanwhile, with so few properties on the market, sellers are concerned about not finding anywhere to move to. As more and more sellers hold off selling, the problem of dwindling supply is exacerbated. But for those vendors willing to take the risk, the rewards can be very attractive. The mismatch between supply and demand is one of the reasons why house price growth hit its highest rate in 16 years in June, according to data from the Nationwide building society2.

Slowing not bursting

So, what does this mean for the property market? While sales still remain high compared to the same period in 2019 (the last year that things were considered ‘normal’), the momentum of transactions has shown signs of slowing down. According to the latest data available from HM Revenue and Customs (HMRC) National Statistics, the provisional seasonally-adjusted estimate of UK residential transactions in May 2021 was 3.9% lower than April 20213.

The shortage of available properties for sale could cause the market to slow rather than burst. As sellers are taking longer to find a suitable property to purchase, many families hoping to relocate in time for the start of the new school year in September may be in for some disappointment.

Why is supply such a problem?

When lockdown restrictions were eased last summer, phenomenal pent-up demand quickly soaked up a large proportion of property listings. However, when lockdown was reinstated in the winter amid rising coronavirus case counts, many sellers – particularly older downsizers – chose not to market their properties to avoid hosting viewings. Meanwhile, families struggled to cope with the idea of selling while juggling working from home full time with home-schooling their children.

While renting is often cited as a way out of the current predicament, many homeowners who have sold recently are discovering a rental market suffering a similar property shortage.

As the economy reopens and the stamp duty incentive ends, supply and demand is likely to reach some kind of equilibrium in time. In the short term however, while supply remains tight, those lucky enough to have found a property to purchase face delays, uncertainty, and the ever-present threat of being gazumped.

Liam Boardman, Mortgage Specialist at Barclays, says: “Clients certainly have had time over the last 15 months to think, ‘is this the right house for me/us?’, so it’s no surprise there is a supply and demand issue, especially in the larger housing and rural market. As lockdown restrictions come to an end, coincided with the end of the stamp duty holiday, it is anticipated that the market will become more balanced.”

Things to consider

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