Post Lockdown Market Shows Little Signs Of Slowing Down

  • Demand continues to run ahead of supply, sustaining annual house price growth at +2.5%
  • Time to sell since the market reopened has decreased by 31% across the UK, averaging just 27 days in the period since lockdown, compared to 39 days over the same period in 2019
  • Three bed houses are selling fastest, while time to sell for four and five bed houses has fallen by a third as buyers prioritise more space; houses are selling faster than flats
  • More homes coming to market in wealthier demographics post lockdown – with wealthier sellers less likely to be affected by recession
  • While market sets new highs, buyer interest has softened 17% over past month, as holiday season takes edge off post lockdown surge – but demand remains 78% above last year
  • Market conditions expected to remain stronger than last year for the rest of 2020 with house prices up 2-3% by the year end
  • Nottingham and Manchester are registering annual price growth over 4% while 16 of the 20 cities covered by the index are recording price growth of 2% or more.

House prices are set to hold firm for the remainder of the year – despite the onset of recession and rising unemployment. These are the latest findings in the monthly House Price Index by Zoopla, the UK’s leading property portal.

Recession Review

There have been five recessions over the last 60 years, each with different underlying drivers. While the last two (1990/91 and 2008/09) were deeper and lasted longer than those before, they also recorded nominal house price falls [see figure 1].

Despite the short sharp recession in 2020, extensive Government support for the economy and labour market, together with support for mortgage holders, has reduced the number of forced sellers and limited the downside for house prices. While the economy has contracted sharply and unemployment is rising, consumer spending has rebounded and various surveys of economic activity are pointing to a wider rebound in the economy. This is positive but the unwinding of the furlough scheme and other Government support is the next challenge that will test the strength of economic recovery.  In the short term, we still believe that house prices will end the year 2% to 3% higher than at the start.

Figure 1: Nominal house price growth 1960-2019 and projections for 2020 Source: Zoopla Research, Nationwide HPI pre 2000 and Hometrack HPI from 2000

No sign of a slowdown

The post lockdown market rebound shows little signs of slowing – despite the recession. The cumulative increase in buyer demand since the start of 2020 is +34% higher than over the same period in 2019, above the +25% that we reported last month and, despite the holiday season, demand remains unseasonably strong.

Higher demand for homes has brought with it increased numbers of sellers and more homes coming to market. While the impact of lockdown means the supply of new homes for sale is below volumes recorded last year, the gap is closing steadily.

Figure 2: A supply and demand imbalance Source: Zoopla Research & Insight

Time to sell falls by [almost] two weeks

Time to sell a home has reduced across all UK regions and countries. Driven by a supply / demand imbalance, the average time to sell a property since the lockdown restrictions were lifted is 31% lower than the same period 12 months prior. The number of days to sell a property in the last 90 days has been 27 days, compared to 39 days over the same period in 2019.

Commenting on the latest UK House Price Index, Richard Donnell, Research and Insight Director, Zoopla, said:

“Housing market conditions remain unseasonably strong despite the UK moving into recession. Demand continues to outpace supply and support house price growth of 2.5% per annum. Meanwhile, houses are selling faster than flats as we see a shift in buyer priorities in the wake of the lockdown and movers prioritise more space.

“The next important milestone for the housing market comes in September when schools reopen and the UK starts to get back towards a full reopening of the economy.  The ‘once in a lifetime’ re-evaluation of housing requirements on the back of the lockdown will be a counterweight to the impact of the recession on housing market activity over the rest of 2020.  While demand has softened over August, we expect the current momentum in market activity to continue into 2020Q4.

“More homes being listed for sale in areas with wealthier demographics goes some way to explain the strength of the housing market at a time of recession and rising unemployment. With half of all homeowners having no mortgage and a large portion of the remainder having considerable equity in their homes, the constraints of affordability and mortgage availability are not spread equally across buyers and sellers.

“The demographic profile of households is not uniformly distributed by geography. We believe part of this shift reflects an increase in activity in London and south east England where housing sales volumes in 2019 were up to 20% lower than in 2015. A soft repricing of the housing in these regions over the last five years has improved affordability while the recent stamp duty changes will have contributed to more homes coming to the market for sale.

“While the economy has contracted sharply and unemployment is rising, consumer spending has rebounded and purchasing manager indices are pointing to a wider rebound in the economy.  This is positive but the  unwinding of the furlough scheme and other Government support is the next challenge that will test the strength of economic recovery. In the short term we still believe that house prices will end the year 2% to 3% higher than at the start.”

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