Here's a summary of what's been happening in the housing sector, together with an outlook for the remainder of 2020 and beyond.
In short, the market continues to be buoyant as buyers want to address their primary need of more space. We suspect this theme will continue for the foreseeable future as homeworking becomes the new norm for many of us. The buoyancy has resulted in a shortfall of housing stock which in turn has resulted in the continued growth in prices. It’s inevitable that demand will slow down due to the impact of weaker economic growth and rising unemployment. As there is a 3-4 month lag between sales being agreed and completion, current deals will carry forward into 2021. Early 2021 is therefore likely to be a busy period, particularly with the stamp duty holiday coming to an end.
Rightmove Insight
Sale prices are up 0.2% for September (£269 below the record of July)
"Second-stepper" homes, these being 3 or 4 bedroomed homes, achieved a record price of £291,618, on average, as more buyers seek larger homes
Sales more than doubled in the ‘top of the ladder’ homes sector (+104%), and growing strongly in the second-stepper sector (+55%) compared to last year
Source: Rightmove
National sales to date are down just 5% when compared to the same period in 2019. This is the highest annual growth rate since September 2016
Nationally, it's took 53 days to secure a buyer in August compared with 62 days in 2019
Source: Rightmove
Tim Bannister, Rightmove’s Director of Property Data says:
“Increased competition for second-stepper homes has pushed prices to a record this month for those looking to take the next step up the ladder. Needing more space has always been the most popular reason for moving house, but now there’s a new urgency for extra space to be able to work from home, which means that there are different sets of buyers competing for the same type of property. At the start of the year a fourth bedroom was very much a luxury for buyers trading up, but it’s now emerging as a must-have for those who are able to take that step. With overall asking prices just a few hundred pounds shy of July’s record, and buyer demand at an all-time high, those currently looking for their next home are likely to find that only offers close to the asking price will be considered, especially for larger homes.”
and
“We’re hearing of challenges at all steps of the buying and selling process, including lenders having to deal with a higher number of mortgage applications and solicitors over their capacity, and we estimate there are nearly 40% more sales currently going through than at this time last year. The temporary stamp duty holiday means that there’s more urgency than usual for the congestion to be cleared by the end of March, making it vital for buyers and sellers to work closely with their estate agent and to make sure that they’re moving fast when the ball is in their court to complete a document or answer questions. We’d advise that buyers and sellers factor in at least an extra month to account for the current delays in the process, if possible, as time is already running short for sales that are agreed now to be completed by Christmas.”
Source: Rightmove
What's Happening in London?
Yearly agreed sales are down 3% with impact varying between inner and outer London:
Outer London - there were strong sales, especially at the higher end
Inner London - activity has proved more challenging, for example, sales are down by 14% in Zone 1 over a 12 month period
The better performance in Outer London has helped the capital climb back to the second fastest region for the average time taken to secure a buyer, now being beaten only by Scotland at 35 days. Sales are taking on average 49 days in London, compared to 69 days last year.
Rightmove share the perspective of various estate and Nick Leeming, Chairman of Jackson-Stops, says:
“When the property market experiences unprecedented demand, such as the UK has seen post-lockdown, you can understand how potential logjams can form throughout the transaction process. For those looking to sell their home now, there are ways in which you can help prevent a sale from taking longer than expected to reach the completion stage. A key way of doing this is to be prepared, get all of your documents, searches, pre contract enquiries and contracts agreed in advance, so that as soon as you have agreed terms with a buyer everything you need is ready. It is also worth investigating the delivery time scales of your solicitor – do your research, read reviews from other sellers. The last thing any seller wants is to wait for two weeks for a solicitor to reply to an introductory email so it is worth looking into the availability of online conveyancers if time is of the essence.”
Learn more here.
Zoopla Insight
Annual growth over a 12 month period in August, was at 2.6%, up from 2.5% in July
Average UK house prices were at £218,262
8 out of 20 of UK's cities tracked by Zoopla, saw growth over 3% per year. Aberdeen was the only city that had a decline
Prices show no signs of slowing as new buyers continue to enter the market - housing demand is up 39% compared to the same period in 2019
Greater supply is increasing choice for buyers and will maintain the rate of house price inflation
Agreed sales over the last 9 months are up 3% higher than over the same period last year, despite the housing market being closed between March and July
There is a 3-4 month delay between sales agreed and legal completion. As a result, there is expected to be a shortfall in the number of sales by 15% by year end compared with completed sales in 2019
There's 10% more homes for sale now compared to 12 months ago
First-time buyer appetite jumped when the English housing market reopened on 13 May 2020 however withdrawal of lower loan to value has hit first time buyers - levels of first time buyers are now aligned with pre Covid levels
Existing homeowners have taken a greater share of home moves at 53% higher than at the same time in 2019. Consequently, there are more higher priced homes coming to the market
Zoopla do not expect much change over the remainder of the year, although expect softening in buyer demand. Richard Donnell, Research and Insight Director at Zoopla, says:
“A change in the mix of buyers is supporting market conditions with sustained demand from equity rich existing owners seeking more space and a change in location.
In contrast, first-time buyer demand is weakening. First-time buyers have been a driving force of housing sales over the last decade.
They remain a key buyer group but lower availability of higher loan-to-value mortgages and increased movement by existing homeowners means a shift in the mix of buyers into 2021.
Housing market conditions remain strong as new restrictions are introduced to control the spread of Covid-19. These changes are likely to continue to support housing demand in the near-term as the importance of the home grows.
However, the housing market will not remain immune to the impacts of weaker economic growth and rising unemployment.”
Learn more here.
Halifax Insight
Halifax have reported that house prices have rebound further to reach a record high, challenging affordability.
August house prices were 1.6% higher than in July
Prices over the latest quarter (June to August) were 1.3% higher than the previous quarter (March to May)
August house prices were 5.2% higher than in 2019
Uncertainty remains and so this is likely to have a greater downward pressure on prices in the medium term. Russell Galley, Managing Director, Halifax, says:
“House prices continued to beat expectations in August, with prices again rising sharply, up by 1.6% on a monthly basis. Annual growth now stands at 5.2%, its strongest level since late 2016, with the average price of a property tipping over £245,000 for the first time on record.
A surge in market activity has driven up house prices through the post-lockdown summer period, fuelled by the release of pent-up demand, a strong desire amongst some buyers to move to bigger properties, and of course the temporary cut to stamp duty.
Notwithstanding the various positive factors supporting the market in the short-term, it remains highly unlikely that this level of price inflation will be sustained. The macroeconomic picture in the UK should become clearer over the next few months as various Government support measures come to an end, and the true scale of the impact of the pandemic on the labour market becomes apparent.
Rising house prices contrast with the adverse impact of the pandemic on household earnings and with most economic commentators believing that unemployment will continue to rise, we do expect greater downward pressure on house prices in the medium-term.”
To learn more, click here.
Royal Institute of Chartered Surveyors (RICS) Insight
Their September survey indicates that there is a strong upturn in activity, with key indicators on enquiries, agreed sales and new listings remaining strongly positive. Nevertheless, respondents to their survey foresee sales weakening due to the economic environment.
The chart below clearly highlights the dip at market closure and the resurgence once the market opened up again in July. Overall, properties for sale remain below the peaks in 2011.
Respondees to the RICS survey expect sales to continue to rise over a three month basis across most regions. However London, South Wales and the West Midlands are expected to have a reduction in sales level. This is not surprising given the current trend in London as many buyers are wanting to relocate.
Source: RICS
Learn more here.
Upsizing or Downsizing?
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