Improving supply means market will stabilise shortly - agency

A gradual increase in the supply of homes coming to the market means the stellar price rises of recent months are unlikely to last through to the end of summer, an agency says.

Knight Frank’s head of UK residential research, Tom Bill, states: “In the same way as other sectors of the economy, house prices have been driven higher by a supply squeeze as the UK comes out of the pandemic. 

“Add in a stamp duty holiday and the fact pent-up demand has been building for years against the backdrop of Brexit, and the result is a burst of house price inflation. 

“More supply is starting to come online, which will redress the balance. We therefore expect UK house price growth will slow down after the summer, declining to five per cent by the end of 2021.”

Bill’s comments come in the wake of new figures from the Nationwide suggesting 10.9 per cent annual house price inflation in the year to May, the highest for seven years. But Bill says this has been fuelled by the unique circumstances created by the pandemic.

“Supply was curbed in the first two months of this year due to uncertainty over new Covid-19 variants, the constraints of home-schooling and an expectation that the original March stamp duty deadline would be missed. The situation was exacerbated as sellers were unable to find purchase options of their own.”