The latest House Price Index from Zoopla demonstrates how the average UK property price has increased significantly over the last year, and shows how this is a consequence of overwhelming demand in the market fuelled by a lack of supply.
The headline figure is that the average UK house price has grown by 7.8% in the last 12 months, and now stands at more than £244,000 as of Q1 2022. In certain regions such as the North West, which contains Manchester and Preston, the average rise was even higher at 9.2% over the same time period.
This has been driven by a major imbalance between demand for property and the available supply. For example, Zoopla figures show that demand in February was 70% higher than the five-year average, and that the supply of new homes to the market was just 5% higher than the five-year average.
It is this dynamic which leads to substantial house price growth. Furthermore, with the overall number of available homes for sale 43% lower than it was five years ago, Zoopla anticipates that this imbalance will not ease any time soon.
Gráinne Gilmore, Head of Research at Zoopla, said: “The new supply of homes has risen above 2021 levels and is approaching the scale of new listings seen at this time of year before the pandemic hit in 2020, signalling that the market is starting to move back towards more normal conditions. However, total supply of stock remains tight, which will continue to put upwards pressure on pricing.”
For those interested in whether house prices will continue to rise, the question becomes: is it likely that supply will increase to meet demand in the coming years?
If this was to happen, house prices would no longer grow this rapidly as demand fell. However, we are extremely unlikely to see any real growth in supply that could come close to meeting demand.
UK government figures show that at least 345,000 new homes are needed in the UK every year to meet demand. However, even the most ambitious housebuilding targets will only deliver a maximum of 300,000 a year. Furthermore, the number delivered in 2019-20 was just over 240,000.
This shortfall of 100,000 homes a year stacks up and puts more pressure on the market every year, pushing up house prices in the short, medium and long term.
Additionally, the JLL 2022-2026 Residential Forecast shows that “housing construction will remain well below the Government’s target for 300,000 homes pa by the mid-2020s.”
JLL goes on to forecast that that there will be a 500,000 home shortfall from the 1.5m homes that need to be built over the next five years to meet demand.
This is an ideal time to buy property in the UK if you are looking for long-term growth and capital appreciation. Regions such as the North West are key areas in this regard, as shown by house and apartment prices in Manchester increasing hugely in the last year.