Demand for housing in England jumps above pre-lockdown levels as 60% of potential buyers say they will push ahead with their plans
27th May 2020
Buyer demand* across England spiked up by 88% after the market reopened, exceeding pre-lockdown levels in the week to 19th May**; this jump in demand in England is temporary and expected to moderate in the coming weeks
- Cities in Scotland, Wales and Northern Ireland registered less of a bounce in demand as their national housing markets remain closed
- Some 60% of would-be home movers across Britain said they plan to go ahead with their property plans, according to a new survey*** by Zoopla, but 40% have put their plans on hold because of COVID and the uncertain outlook
- Harder measures of market activity are more subdued - new sales agreed in England have increased by 12% since the market reopened, rising from levels that are just a tenth of typical sales volumes at this time of year
- House price growth was flat over April - the lowest monthly growth since January 2019
- Continued Government support for the economy and the availability of higher loan-to-value mortgages will shape the market outlook for 2020H2
27th May 2020, London: Two weeks on from the Government reopening the property market and pent-up demand has exceeded levels recorded pre-lockdown at the start of March, according to the latest findings of the UK Cities House Price Index by Zoopla - the UK’s leading property resource.
Majority of would-be movers plan to continue while 41% postpone plans
A consumer survey by Zoopla has found that some 60% of buyers in the UK are planning to continue with their search for their next home. Of that cohort, 22% of buyers said that they have not been impacted by COVID-19 and expect to continue unaffected. Meanwhile, 37% said that while they had been impacted to some extent, they were looking to continue with their purchase as soon as possible. By contrast, 41% said they have put their plans on hold, citing market uncertainty, loss of income, and diminished confidence in future finances as deterrents.
An unprecedented, but temporary, bounce back
The property sales market in England reopened to a surge of pent-up demand. In the week that followed 12th May, demand jumped by 88% and was 20% higher than at the start of March [Figure 2] - but with projections for a major decline in economic growth and rising unemployment, the rebound in demand is expected to be short-lived.
After the market was suspended for 15% of the year at one of the busiest times for market activity, a return of pent-up demand was to be expected, especially given the strong start to the year.
The scale of the bounce back in demand over the last week (to 17 May) varies across cities depending upon the country in which they are located. Despite a large rise in demand, London’s recovery is lagging behind, alongside cities in countries where the housing market is yet to reopen. Scotland, Wales and Northern Ireland have not recorded any major rebound in demand like that seen across English cities. Demand for homes in London has been partly diluted as would-be buyers look to commuter towns outside the capital in response to COVID.
Zoopla’s latest data shows that demand has rebounded faster in cities along the south coast and in northern England. Portsmouth and Southampton are registering demand some 40% higher than in February this year with strong growth also recorded in Newcastle and Leeds.
Two factors will dictate how the market performs in 2020
Looking ahead to the remainder of the year, the latest report identifies two distinct aspects for consideration. First is how many of the 373,000 stalled sales make it to completion. Second is how much the demand for homes holds up and how much of this pent-up demand converts into new sales and pricing evidence. These new sales will give a clearer view on pricing trends over the rest of the year and into early 2021.
Do fall throughs pose a major threat to the 373,000 stalled sales?
By reopening the market, the Government has improved the chances of a higher proportion of stalled transactions completing than if the market had stayed closed for longer. That said, latest data suggests a small pick-up in the rate of fall throughs since 12th May, but at levels well below the average for this time of year.
We currently expect a significant proportion of agreed sales to continue, but increased uncertainty over the economic outlook will see housing chains tested in the coming weeks.
An otherwise subdued market
While demand for homes has grown, harder measures of market activity are increasing more slowly, reflected in the 40% of prospective buyers who have put their plans on hold. New sales agreed, sold subject to contract, were running at 10% of normal levels over the lockdown period and have now started to increase off a low base, based on viewings from before the lockdown. We expect sales volumes to increase further, but at a more moderate pace given the typical two month lag between new demand entering the market and sales being agreed. Moreover, if available supply does not increase, then not all demand will be satisfied.
Extension to government support
The annual rate of house price growth fell from 2% to 1.9% from March to April, representing the lowest month on month change since January 2019, and prices were unchanged in April. We expect the slowdown in the rate of growth to become more marked over the summer months as the impact of the market suspension and coronavirus lockdown emerge in house price data for new sales. Whether house prices fall will be determined to a great extent by the Government’s preparedness to provide ongoing support to the economy while lockdown restrictions are slowly lifted.
Commenting on the findings of the latest UK Cities House Price Index, Richard Donnell, Director of Research & Insight, said: “The scale of the rebound in demand for housing is welcome news for estate agents and developers, but it is also surprising given projections for a sharp rise in unemployment and a major decline in economic growth.
“The COVID crisis and 50 day lockdown have created an unexpected one-off boost to housing demand. Millions of UK households have spent a considerable amount of time in their homes over the lockdown period and missed out on hours of commuting. Many households are likely to have re-evaluated what they want from their home. This could well explain the scale of the demand returning to the market. We need to see more supply come to the market to satisfy this demand.
“The economic impacts of COVID will grow in the coming months and uncertainty is building. The majority of would-be movers plan to continue their search, encouraged by low mortgage rates and continued Government support for the economy. However, we expect the latest rebound in demand to moderate in the coming weeks as buyers and sellers start to exert greater caution. Further support from the Government can’t be discounted and would help limit the scale of the downside risks.”
*Demand is active engagement and refers to individuals who are proactively engaged in finding out more about property, which includes enquiries. Browsing is passive and refers to those who view property online with no immediate plans to buy or sell.
**Data recorded from 12th to 19th May 2020.
***Zoopla surveyed over 2,000 consumers who are engaged in the housing market, 45% of whom are planning a move in the short term. The questions assessed attitudes and intentions towards home moving in the wake of COVID-19.
Notes to editors
About Zoopla’s UK Cities House Price Index
Zoopla’s House Price Indices are based on the largest underlying data sample of any UK house price index. The 20 cities covered by the index contain 35% of the UK housing stock by volume and 43% of capital value. Our index FAQ’s have all the information about our indices and how they are run. Data for the index is powered by Hometrack, a part of Zoopla. Hometrack is a leading provider of automated property valuations and statistical property market insights in the UK to over 400 partners including mortgage lenders, developers, investors, government agencies, housing associations and others.
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