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Zoopla: New sales agreed in June ran 28% above pre-lockdown levels

New sales agreed ran 28% above pre-lockdown levels in June, as the surge in demand converted into actual sales, according to the monthly House Price Index by Zoopla.

The market suspension during lockdown reduced the flow of new supply and sales agreed by 90%.

While these measures are now rising ahead of their pre-COVID levels, the increase in sales and supply since the start of the year is lagging 20% behind compared to 2019.

In contrast, in June 2020 demand from buyers was double that of the same period in 2019.

On a cumulative basis, since January 2020, demand ran 25% higher than the same period in 2019 despite the lockdown and market closure.

Zoopla’s analysis suggested that this was primarily ‘catch-up’ demand for what was lost over lockdown, and estimated that returning buyers accounted for 80% of levels that would have been expected over this period in 2020 had COVID not struck.

Regional cities across the north of England recorded stronger growth in demand in the first half of 2020 compared to 2019, while new supply was hit countrywide as a result of the market closure.

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Top of the list for demand are Sheffield, Liverpool, Manchester and Nottingham, which are all in the top fastest growing cities in terms of house price growth.

Short-term demand for city living is holding firm, despite predictions that it would fall. Research has suggested that COVID-19 has boosted demand for homes outside major cities; however, Zoopla said it expects this to be a one-off factor rather than a long-term shift in consumer attitudes.

London ranks fifth for growth in demand since the start of 2020; this demand has seen a modest shift away from the centre, towards the suburbs and commuter belt.

Despite an overall decline in annual transactions, London enjoyed an immediate boost to sales agreed following the temporary stamp duty holiday implemented by the government.

New sales agreed increased by over a quarter (27%) in just two weeks in London, which was geared to benefit most from the changes.

This boost to transaction volumes was not replicated in other regions, where average property prices are lower and less responsive to stamp duty amends.

While stamp duty relief will support demand in higher value markets across southern England, Zoopla said this was unlikely to sustain demand indefinitely into 2021.

UK house price inflation in the 12 months to June 2020 rose to +2.7%, registering the highest level of annual growth for almost two years.

By contrast, the monthly rate of growth has halved to 0.2% and the city level price indices registered slower growth still as a result of lockdown and reduced pricing evidence.

While there was a wide variation in annual growth rates across the country, there was no evidence of material, localised annual price falls at a regional or city level.

Based on current trends, Zoopla predicted that the headline annual rate of growth is set to remain positive, as the growing imbalance of supply and demand is set to support prices for the remainder of the year.

Richard Donnell, research and insight director at Zoopla, said: “COVID and the lockdown have shifted the dynamics of supply and demand across the housing market.

“The staggered reopening of housing markets across countries and the added impetus from the stamp duty holiday mean we expect buyer demand and new sales volumes to hold at current levels over the next two months.

“The net result will be continued support for house price growth at current levels over the second half of the year.

“Regional cities in northern England and the Midlands have the strongest underlying trends.

“For those operating in the market, and others looking in, the latest forecasts for increased unemployment and a sharp economic contraction over the next 12 to 18 months certainly seem at odds with current levels of sales market activity.

“We expect rising unemployment to weigh on market activity over the final quarter of 2020 and into the first half of 2021.

“The impact on pricing looks set to be pushed into 2021 as a result of sizeable government support for the economy.

“Further support cannot be ruled out while forbearance by lenders, and the availability of the mortgage payment deferrals, which can start up until the end of October for three to six months, is likely to limit the scale of downside for house prices.

“Much depends on how businesses respond to the outlook and their decisions on staffing levels and the knock-on impact for unemployment.”

By Jessica Bird

Source: Mortgage Introducer

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UK house price growth to remain positive over the next quarter – Zoopla

The latest Zoopla House Price Index has been published, with the bulk of new pricing evidence coming from sales agreed before the lockdown.

Data on pricing for new sales agreed in the last four weeks is starting to feed through and points to a resumption in the upward pressure on house prices seen at the start of the year.

As an example, average asking prices for properties marked as sold on Zoopla, which were rising at 7% in the first three months of the year, have returned to registering a similar growth rate over the first two weeks of June.

Near-term outlook for house prices

Most of these new sales agreed are likely to complete between August and October 2020, which Zoopla expects will show sustained UK house price growth of between +2% to +3% over the next quarter, once they feed into the index.

While some have forecast annual house price falls over calendar year 2020, the portal expects any price falls in the house price indices only to crystallise in the final months of the year.

Economic impacts of COVID-19 to hit home in H2 2020

After an initial rebound, demand is expected to weaken over the summer months as the economic impact of COVID starts to materialise, with figures reported last week by the ONS indicating an acceleration in unemployment.

Caution amongst lenders and more limited availability of 90% loan to value (LTV) mortgages will reduce demand, particularly amongst first-time buyers who, over recent years, have been the engine of the housing market.

In 2019, a fifth of all homebuyers purchased a home with a deposit of 10% or less, so a decrease in the availability of 90%+ LTV mortgages could preclude this cohort of would-be buyers from entering the market, effectively reducing demand.

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Government and central bank support will continue to play an important role in how the economy fares with a knock-on impact for the strength of consumer sentiment.

Retail sales, for example, rebounded more than many expected in May.

While almost a fifth of mortgage holders have taken payment holidays, borrowers are able to take these up until the end of October 2020, meaning support is extended for the rest of the mortgaged sector up until April 2021.

Further support and innovation to support the economy and the housing market cannot be ruled out in these unprecedented times, which will limit the downside, albeit not completely.

Strongest sales rebound in northern cities

New sales agreed, subject to contract, have grown the most in England where the market is open for business.

The rebound in sales has been strongest in northern England, led by Leeds, Sheffield and Manchester where sales are up to 20% higher than in February 2020.

In cities where sales are not keeping pace with pre-COVID levels, including Glasgow, Newcastle and Cambridge, this is down to a lower supply of homes for sale.

Level of homes for sale (inventory) in these cities is significantly lower than last year.

While the new flow of homes for sale is back to pre-COVID levels, the number of homes for sale per estate agency branch is 15% lower than a year ago.

This is a result of the market closure at what is a busy time of year.

Stock levels in Cambridge, for example, are up to 40% lower year-on-year.

Zoopla says that the lack of supply supports their view of house price growth holding steady in the short term.

House price growth

UK house price growth is up 2.4% on the year, and has increased from 1.6% at the start of 2020.

The 20 city index registered slower growth over May, slowing to +2.1% from 2.4% in April as less pricing evidence dragged the growth rate lower.

The city with the highest rate of house price growth over the past 12 months is Nottingham (4.3%), followed by Manchester (3.9%).

Meanwhile, Oxford (-0.6%) and Aberdeen (-2%) have recorded modest price falls.

Regional momentum

Activity levels are expected to rebound in Scotland, Wales and Northern Ireland as these markets reopen and pent up demand is released.

These countries account for less than a fifth of UK housing sales but more activity will support headline measures of demand and market activity in the immediate term.

The Welsh market opened on Monday but demand for homes has been building since the English market reopened, gaining momentum over the last two weeks.

Demand for housing in Wales has now rebounded close to what has been recorded in England.

Sales agreed, however, remain 65% lower than pre-COVID levels in Wales as the physical viewing of property has not been permitted.

Zoopla expects sales volumes to increase over the rest of June and into July, mirroring the rebound in England.

Scotland’s market, which reopens later in June, has seen a similar trend with demand recently returning to pre-COVID levels, but with sales volumes lagging well behind.

Commenting on the findings Richard Donnell, Director of Research & Insight, said:

“The rebound in housing market activity has taken many in the industry by surprise.

“It is welcome news given the projections for falling economic growth and rising unemployment.

“Estate agents and developers are responding and using the upsurge in demand to rebuild their sales pipelines and open up their developments.

“We see returning pent up demand and new buyers entering the market creating upward pressure on prices in the face of a lower supply of homes for sale which has been exacerbated by the lockdown.

“House price growth is set to hold up in the near term and we expect the downward pressure on prices to come in the final months of the year as demand weakens.

“While the average asking price for homes marked as sold on Zoopla are 7% higher than a year ago this is down to an increase in sales in higher value markets where activity has remained subdued in recent years.

“We do not expect the rate of growth in the Zoopla House Price Index to reach this level, rather it is expected to hold steady at 2%.

“The Welsh housing market opened this week and levels of demand have already returned close to the levels seen in England in anticipation of the market reopening. Scotland, where the market reopens on 29 June has also seen demand rise back to pre-COVID levels but sales remain more than two thirds lower and are expected to rebound in the coming weeks.”

Source: Property Industry Eye