But the supply of homes for sale remains tight, pushing prices higher.

Buyer demand spiked by 24% in the week following the Budget as people scrambled to take advantage of the stamp duty holiday extension.

Overall demand was also 80% higher in that same week compared to the same time period over the previous four years, due to a combination of the tax break and the ‘search for space’ triggered by the Covid-19 pandemic.

But the supply of new homes coming on to the market remains constrained, putting further upward pressure on prices, according to our latest House Price Index.

These factors contributed to annual house price inflation of 4.1% in February, more than double the rate of 1.8% recorded in the same month of 2020.

How busy is the housing market?

The Budget announcement that the stamp duty holiday on homes costing up to £500,000 will be extended until 30 June, with a tax-free threshold of £250,000 in place for a further three months, has triggered a fresh wave of interest among potential buyers.

The number of sales agreed is 5.3% higher than it was a year ago, while the average time it takes to sell a property, excluding London, has fallen by nearly a week to just 44 days.

But while buyer demand is 80% higher than the long-run average, the supply of homes being put on the market has actually fallen by 13%, compared with the same period of 2020.

That said, the volume of homes for sale is expected to start to recover as the Covid-19 vaccine programme continues to gather pace and lockdown restrictions are lifted.

What’s happening to house prices?

Unsurprisingly, the mismatch between supply and demand is continuing to drive house prices higher.

The typical value of a home is now 4.1% higher than at the start of the first national lockdown in 2020, with prices rising by an average of £8,907 during the past year or £750 a month.

February marked the fourth consecutive month during which house price growth was above 4%, matching levels last seen in the summer of 2017.

Wales has seen the strongest gains during the past year at 5.7%, followed by the North West at 5.4% and Yorkshire and Humber at 5.2%.

Meanwhile, house price growth in the Midlands, North of England, Wales and Scotland is at an almost 10-year high, fuelled by the relative affordability of these markets.

Growth is slowest in southern regions, where affordability has become increasingly stretched, with prices rising by only 2.3% in London, 3.3% in the South East and 3.5% in the East of England.

Northern cities also continued to outperform their southern counterparts.

Manchester led the way with year-on-year price increases of 6.6%, followed by Liverpool at 6.4% and Leeds at 5.4%.

At the other end of the scale, prices edged ahead by just over 2% in Cambridge, Oxford and Southampton, while Aberdeen, where the property market has been struggling for some time due to the low oil price, saw property values drop by 1.3%.

What could this mean for you?

The jump in demand, which is feeding through into faster selling times, is good news for anyone with a property to sell.

But sellers who are also looking to move up the property ladder are likely to find themselves facing increased competition for their next home.

This is likely to particularly be the case for people in northern regions, where the property market is hottest, and those looking for houses, rather than flats.

Our data also points to an increase in demand among first-time buyers following the Budget announcement about the new 95% mortgage guarantee scheme, which launches on 1 April.

The share of mortgages taken out by first-time buyers fell in 2020 as lenders withdrew loans for people with small deposits, so if you are planning to take your first step on the property ladder this year, you can expect to face more competition for entry level properties.

What’s the outlook?

People’s reassessment of their homes in the light of the pandemic looks set to continue, as homeowners look for more space both inside and outside of their property.

As lockdowns start to ease, more homes should come on to the market, as sellers feel more comfortable about inviting potential buyers into their home, further driving market activity.

Head of research said: “The prospects for the housing market over the next year have improved on the back of the Budget. The continued search for space, the stamp duty extension and mortgage guarantees will support activity levels and headline house price growth up to the end of Q2 2021.

“Yet the pathway out of the lockdown, and the route to a full re-opening of the economy and unwinding of support measures, is unlikely to be simple or smooth.

“We still expect house price growth to moderate later in the year, but overall transactions are set to benefit from an additional boost following the stamp duty extension and tapering.”

Top three takeaways

  • Buyer demand spiked by 24% in the week following the Budget as people scrambled to take advantage of the stamp duty holiday extension

  • But the supply of new homes being put up for sale remains constrained putting further upward pressure on prices

  • At a national level, house price growth stood at 4.1% in February, more than double the rate of 1.8% recorded in the same month of 2020