June 17, 2020

A sweeping rebound for the UK property market

In the final seconds of the year, there is always a sense of optimism to what the new year has in store.

The arrival of the new year seems to offer the ability to reinvent ourselves and the world around us.

Though as 2019 drew to a close, its undeniable that 2020 had a certain ring to it which truly did accentuate that level of optimism for a special year ahead.

Many people will have experienced that hopeful bright light quiver just days and weeks into the year. As for the rest of the world, the flame soon dissipated in the months that followed.

Unfortunately, 2020 quickly became a special year for all the wrong reasons.

When Covid-19 swept through the streets of the UK, almost every market was placed on hold as the country came to a grinding halt.

Soon became a growing sense of uncertainty as to how the UK economy would shape up once the crashing wave of the pandemic had ridden its course.

So when news broke that PM Boris Johnson was giving the green light for markets to begin reopening in May, economists have kept a close eye on the property market.

This is because, as Richard Donnell, director of research at Zoopla, describes: “It is purely an extension of the economy.”

Across the UK, there has been a unity of uncertainty to the future which lays ahead, as many looked to the reopening of the markets as the beginning of the return to normality.

Well, according to the latest data and analysis released by Zoopla this week, the property market is set to deliver even more unprecedented news.

Remarkably, the suppressed demand has actually translated into stronger house prices, with average asking prices of sales agreed in the last week 6% higher than June 2019.

This is a strong indicator that house price indices might not register the immediate price falls which were initially feared.

If you are a regular reader of Elavace’s market reports, you will already be aware that the pent-up demand for homes comes as a result of buyers and sellers placing their transactions on hold during the lockdown.

However, Richard Donnell had this to say on the recent Zoopla findings: “The rebound in housing demand is not solely explained by a return of pent-up demand,” he said.

“Covid-19 has brought a whole new group of would-be buyers into the housing market. Activity has grown across all pricing levels, but the higher the value of a home, the greater the increase in supply and sales as people look to trade up.”

Many agents are also claiming that lockdown has made buyers re-evaluate what they want from a house, and workers believe they will make fewer daily journeys into city centre offices.

This would explain the knock-on effect the lockdown has had on the declining property market in London.

Many economists had forecasted a surge in market activity upon the easing of the lockdown but could never have foreseen the level of new sales agreed to reach the heights of the weeks before lockdown.

Better yet, according to the portal’s research, the demand for housing has defied all odds and is now54% higher than at the start of March.

With a staggering 137% boost to the volume of would-be movers joining the housing market in the last four weeks!

Elavace investors will be jumping at the news that the North-west is actually one of the strongest regions to come out of the lockdown.

With sales in this region now just 0.9% less than the week ending 8th March, according to Zoopla.

However, the same can’t be said for London where sales have plummeted by 24.8% compared to pre-lockdown levels, despite the market being open for four weeks now.

A reliance on public transport has made it harder for businesses to return to normal and as a result, many employees have adapted to working from home and no longer need to commute into the city.

Thus more and more buyers in London are searching for more affordable living outside the capital.

Already, there are signs of the shift in market demand as the figure for markets outside London in the week ending June 6th became the highest since May 2018.

Not only this, offers accepted outside of London were the highest on record and more than 50 per cent above the five-year average, according to agent Knight Frank.

Damian Gray, head of Knight Frank's Oxford office, said: "Enquiry activity has been extraordinary. I've never been contacted by so many people to live outside London".

Given the current economic climate, it meets expectation that sales at the very top end of the market (£5-10m+) have experienced a drop in demand, now standing at just 10%.

However, properties priced in the £1m+ bracket have taken an unprompted turn—somehow doubling in the past week to 664, compared to the 494 sold in the same week a year ago.

Last week’s figures from Zoopla show that homes valued between £250,000 and £500,000 are in the most demand right now.

Recording the largest number of sales with an enormous8,956 properties sold subject to contract, compared to just 7,744 this time last year.

It is important to stress that despite a very promising first four weeks, it remains too early to predict how the UK economy and housing market will respond to the lockdown in the medium and long term.

However, as Elavace have countlessly reiterated, this economic downturn is completely different to any other recession in recent history.

Therefore, the time it will take for the UK economy to bounce back to its prospering self will be far less than it has been in the past.

Last week’s figures can attest to this as clearly buyers and sellers have growing faith in the property market to withstand this crisis, and so should you.

Its time to relight that optimism we left behind in March!

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