Thursday, 3 September 2020

Housing activity at its strongest for five years

According to the latest Zoopla House Price Index, housing market activity is at its strongest since 2015. This has been driven by pent-up demand and a once-in-a-lifetime re-evaluation of what buyers want from a home in the wake of lockdown. The stamp duty relief, which I suggested at the time probably wasn’t strictly needed, also appears to have added fuel on the fire.
The number of new sales agreed in August on Zoopla is 76% higher than the five-year average. Typically, August is seen as a quiet month for the market as people fly abroad whilst the kids are on Summer holiday. With the majority of those plans in tatters, it seems the typical housing market schedule has shifted too.
Considering the long period of lockdown and ongoing restrictions, not many would have bet on a 34% increase in buyer appetite since the start of 2020 compared to January-August of last year. Fortunately for current prospective buyers, more homes have been coming to the market too, with supply in the previous month up 50% compared to last year.
The bounce in activity is also leading to properties selling quicker than before the pandemic across all regions of the UK. Homes sold since 13th May took just 27 days to do so, compared to 39 days in the same timeframe last year.

Things aren’t equal in this regard when considering the type of property though. I have long argued that houses are a preferable purchase to flats and this has become clearer to many during the months of lockdown, who now value a private garden more than ever before. As such, houses are selling quicker than flats, with three-bedroom houses the quickest to sell (24 days on average) and two-bedroom houses not far behind (26 days on average). Flats, in comparison, are taking 32 days to sell on average.

The larger houses aren’t sticking around either; with four and five-bedroom houses selling 33% faster than they were a year ago. They used to be the slowest types of properties to sell and yet they are both now selling quicker than flats are. This appears to have been boosted by workers moving from more expensive urban areas in favour of locations further away from work for lifestyle choices, now that many are looking to work from home on an ongoing basis.

Due to a large number of more expensive homes being listed, the average asking price has risen 8% compared to a year ago. House prices haven’t increased though (the annual rate of UK house price growth slowed to 2.5% in July, from 2.7% in June), but the proportion of more expensive homes for sale has. The stamp duty relief is thought to be a key reason for the surge of activity in London and the South-East, as the savings on offer in these areas are greater than average.

It will be interesting to see whether this increased level of activity runs out of steam as schools re-open and the full ramifications of the pandemic’s economic impact becomes clearer. Now in recession, the economy has already contracted sharply and unemployment is rising, although some are hopeful that a strong rebound in consumer spending will soon spread to the wider economy. I suspect October-December will be crunch time, as the furlough schemes end and businesses need to make difficult decisions that will test the strength of any economic recovery and, as a result, how the housing market will fare.

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