Economist's view: Comment on ONS House Price Index January 2021 figures
Commenting on the recently released Office of National Statistics House Price Index figures for January 2021, Nitesh Patel, Strategic Economist at Yorkshire Building Society, said:
Despite going into the third lockdown the housing market continued to perform robustly in January, which is usually a quiet month. The data shows house prices grew 7.5% annually, slightly down from 8% in December, with the average UK house price now £249,309.
The dash for space continues at pace as buyers snap up larger homes, adding upward pressure on prices. In the past year the price of detached homes has grown by 8.6% compared to 2.6% for flats – three times the rate. Since March 2020, the popularity of detached homes has grown, now accounting for 28% of all home sales, up from 22%. Flats now account for a smaller share at 12%, down from 17% over the period.
Across the country there is large variation in price movement. In the North West average house prices have grown by 12% in the past year more than twice the rate seen in London, where the rise is a more modest 5.2%. Whilst some have suggested this indicates a mass exodus of people away from the capital, the reality is probably different. A year ago, price growth in the capital was extremely strong following the General Election and increased certainty over Brexit, with the pandemic yet to hit the UK – since then, the restrictions on domestic and international travel have impacted the London market, particularly central London, which tend to attract overseas buyers.
The Chancellor’s announcement of a stamp duty holiday extension and 95% mortgage guarantees, as well extending the job support schemes should provide further support for the housing market in 2021, with confidence likely to endure as long as there is an effective vaccine roll-out and infections continue to fall, allowing the gradual reopening of the economy. In February there 147,000 transactions, almost 50% higher than the same month last year, as buyers tried to beat the original stamp duty cut deadline. We expect demand to stay at an elevated level relative to supply, and as a result adding further pressure on prices.