House prices are set to hold firm for the remainder of the year – despite the onset of recession and rising unemployment, according to the latest Zoopla house price index.
Zoopla says demand continues to run ahead of supply, sustaining annual house price growth of 2.5%, and expects market conditions to remain stronger than last year for the rest of 2020.
Its figures show that the cumulative increase in buyer demand since the start of 2020 is 34% higher than over the same period in 2019, above the 25% reported last month.
As a result, the 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.
Three-bedroom houses remain the fastest selling property on the market, with an average time to sell of 24 days since the lockdown lifted. The supply/demand imbalance is most pronounced for three-bed houses. While they are the most in-demand property type, the proportion of available supply falls short of demand across all parts of the UK – supporting faster sales periods.
Four and five-bed houses are selling 33% faster than in 2019, as buyers prioritise more space and widen their search criteria – migrating away from the more expensive cities, suburbs and commuter belts while enabling their budgets to stretch further. Meanwhile, flats are taking the longest time to sell at an average of 32 days – although this still remains quick.
The flow of new supply is running 54% ahead of this time last year, but overall stock per agent remains 3% lower. There has however been a shift in the profile of sellers, with an increase in wealthier demographics looking to move, which in turn is pushing the average asking price of a home for sale on Zoopla up 8% compared to a year ago.
Zoopla says it is likely that this shift in activity is being driven by the reignition of activity in London and the south east of England, where housing sales volumes had previously fallen back 20% since 2015. A soft repricing in these regions over the past five years, coupled with recent SDLT relief, has resulted in a modest rebound in activity in these higher value markets where sales volumes had been suppressed.
In addition, it is possible that wealthier homeowners are bringing forward their decision to sell in anticipation of a Government consultation on Capital Gains Tax.
Richard Donnell, Research and Insight Director at 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 2020/Q4.
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.”