Written by:
John Jackson
Industry Editor
Last year was undoubtedly the most untypical year many of us will have ever encountered, and yet through it all the housing market in Wales remained buoyant. National figures for house prices in Wales provide a top level view of the market, and for example 5% has been quoted by Nation Cymru as the increase in Wales for 2020, which is in comparison to the 4.3% increase quoted for the UK as a whole. Depending on property type and location this figure will be subject to significant variation, but the headline message for house prices in Wales in 2020 is one of continued increases.
The first Lockdown is seen to have created pent-up demand in the property market, with a rapid and significant recovery in sales from May 2020 onwards, as clearly shown in this report from Savills. At the time, I remember thinking that people would be concerned about their job security and that this in-turn could have suppressed demand in the housing market. Instead as we’ve seen demand has remained strong, although taking a closer look it hasn’t been the case for all types of housing. Looking at the UK Government Land Registry data for Wales, comparing average price changes between August 2019 and August 2020 reveals that:
- Detached properties increased by 3.3% to £262,266
- Semi-detached properties increased by 4.3% to £168,923
- Terraced properties increased by 1.6% to £133,097
- Flats/maisonettes decreased by -0.1% to £117.138
This variance in performance seems to be reflective of a number of factors:
- Spending time at home in Lockdown the livability of homes was put under the spotlight with the need for extra space becoming an increasing priority for buyers.
- The perception that living in a densely populated area increased the chances of catching Covid19. Whilst this isn’t borne out by the experience of high density cities around the world, once a perception is in place people will want to act on it and seek homes in more spacious settings.
- The widespread adoption of working from home will be creating more freedom of choice in terms of where to live.
- Small apartments, often without balconies made the Lockdown experience particularly difficult for their occupants.
- Concerns around cladding is making apartments less attractive as a purchasing option.
With major cities including: Liverpool, Manchester, Birmingham and Bristol, along with M4 and rail access from Swindon, Reading and London – where all of the above factors also apply, Wales has the potential to become an increasingly attractive location for people to relocate to. This in itself could fuel further price increases, particularly if people are moving from areas where house prices are significantly higher than those in Wales.
In terms of location, rural areas have according to Savills, “…seen the highest levels of sales agreed compared to 2019. Sales agreed during September and October in Monmouthshire and Pembrokeshire were both at over 75% above the same period in 2019 compared to 39% above for Wales as a whole”.
With housing being in short supply, this raises concerns about the affordability and availability of what are much needed new homes in our rural communities. Housing Associations and councils are increasing the volume of homes they are building, although whether they are able to build at scale to ameliorate this shortage, in both rural and urban locations, only time will tell. In 2021 it will be important to understand if a shift from urban to rural living becomes an increasing and consistent trend, and if in the urban environment demand for detached homes and semi-detached homes continues to outstrip supply.
To gain an expert view on the property market in 2021, I asked Melfyn Williams, BSc (Hons), MRICS, PPNAEA, CPEA, Director at Williams & Goodwin, The Property People Limited for his thoughts and he explains:
“No doubt this year more than ever will be difficult to predict in the short term with the ongoing matter of the pandemic, any fall out from Brexit and of course the usual issues of affordability, supply and demand will all again this year and in their own locality, play a part in what happens.
According to the Nationwide Building Society, despite the pandemic, the average UK house price ended the year 7.3% up on the previous year with our area statistics displaying around 5.4% price growth. Remarkably there is still a lot of heat in the market – with website activity on Boxing Day being 70.5% up on last year! (Source: Property Portals). You might expect that tougher Covid-related restrictions and our formal departure from Europe at the end of last month would have seriously damaged the property market, yet the opposite seems to be true. It may be that this surge in activity towards the end of the year just catching up for the sales that did not, or could not happen in the first lockdown back in the spring.
The LTT concession in place is currently due to end on 31st March 2021. In Wales the concession was on main residence property only, up to £250,000 while across the border buyers on property up to £500,000 have been benefiting from the concession. The pressure is now on for those to purchase before the deadline.
What is likely to have the greatest impact in the coming months in the property market will be employment and any redundancies which may appear as furlough schemes and other business support packages are finished.
People will always need a home and this usually bodes well for the lettings sector. Demand has been strong in the last quarter of 2020 with average rents in our area increasing to over £700 for the first time. One has to question if this is sustainable and if the sales market slows down, more property may enter the lettings market which may then affect yields and rental levels”.
From his perspective in West Wales, I also asked Neil Evans, MNAEA, MARLA, Managing Director of West Wales Properties Limited, for his thoughts on what we can expect from the property market this year:
“At this time of year there are usually many “experts” who give their opinion on what they think will happen in the property market over the next 12 months, this year there seems to be far less who are prepared to predict.
It is our opinion that there are many factors that influence buyers of property, the main factor is “confidence” which is affected by economic climate, job security, interest rates, mortgage availability, government intervention etc. All or some of these factors could change quickly over the next 6 months.
In normal times property prices are affected by supply and demand, currently there is a substantial shortage of properties coming onto the market which has resulted in significant increase in property prices over the past 2 years in the West Wales area. Having said that, the average house price in the area is only 4% above the average price at the peak in 2007 according to the latest Land Registry figures.
There are a number of factors which certainly could affect the market in the short term; the success of vaccination programme, the removal of current government restrictions, the effect of Brexit and the health of the general economy, the removal of the Land Tax holiday at the end of March. The end of the furlough scheme at the end of April, the availability of 90% mortgages for first time buyers and general finance for Buy to Let investors.
It is our opinion that properties in the West Wales area offer fantastic value for money, with the added benefit of offering a quality lifestyle in one of the most beautiful areas of the country. We therefore believe that we will continue to see more buyers making the correct choice by investing in properties in the West Wales area.”
If 2020 showed us anything it was the resilience of the property market. Even amidst the pandemic, with the added uncertainty as to what Brexit would look like, and even experiencing a period in the first Lockdown that effectively closed the market, house prices have continued to increase. This year, as both Melfyn and Neil highlight, there are uncertainties that until they fully become apparent makes it difficult to predict what will happen in the property market in Wales this year. These include: how businesses are able to perform in our post-Brexit environment, the extent of the impact to jobs and the economy when furlough and other government support programmes end, and the speed and effectiveness of the vaccine programme.
Even if we do encounter worse case scenarios, there will still be a need for people to move, and there will continue to be an overall shortage of houses. These factors should ensure that demand will continue to be present in the market, although the strength of that demand will be determined by the wider economic and social conditions that prevail in 2020. These are the unknowns that will make predicting house price changes in Wales particularly difficult this year.
