12 Jun, 2020

Housing demand exceeding pre-lockdown levels

Axis 6

Since being reopened by the government, the UK housing market has continued the incredible growth that it saw at the beginning of 2020.

We have already seen that demand has been high since the reopening, but the latest UK Cities House Price Index shows that it has already surpassed pre-shutdown levels.

The headline figure is buyer demand went up by 88% in May, exceeding what we saw in March and painting a positive picture for the future. While it is likely that these figures will moderate somewhat in the coming months, it is solid evidence that people’s desire to buy new properties remains undimmed.

With so many people trapped inside for a prolonged period, it is not a surprise that many have re-evaluated what they want from their home – and now they have the opportunity to fix that.

The Index also shows that harder measures of market activity are also performing well. New sales agreed and sales subject to contract have both begun to increase from their lockdown base. Hometrack predicts that this will continue, stating:

“We expect sales volumes to increase further but at a more moderate pace given the typical 2-month lag between new demand entering the market and sales being agreed. If available supply does not increase, then not all this demand will be satisfied.”

The latest data from Zoopla confirms this upturn. The property portal shows that sales in most of England have rebounded to pre-lockdown levels, and the pent-up demand has led to firm prices rather than the falls that were anticipated by more pessimistic analysts.

The average asking price for sales was 6% higher last week than in the same week of June 2019, according to Zoopla. Richard Donnell, the company’s research director, says: “This new data suggests house price growth is set to remain positive in the next two months.”

Finally, returning to the Hometrack UK Cities House Price Index shows that these gains are likely to be concentrated in regional cities. Following the pattern of recent months, London property prices are still performing poorly, growing just 1.1% year-on-year compared to the national average of 1.9%. With the London market failing to rebound, we expect to see more and more people leaving the capital for new pastures over the coming months and years.

In comparison, the story is the exact opposite in regional cities like Manchester (3.8%) and Birmingham (2.5%) which have seen house price growth many times higher than London. This is a pattern in itself, and one that is set to be repeated in the future. Anyone looking for high capital appreciation prospects has been well-advised to look to cities like these for years now – and there are no indications that will change in the future.

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