Since the start of the year, the UK property market has been through one of the toughest periods in a generation. This edition of the property news will recap some of the effects Covid-19 has had on the property market and how the recovery may now be underway.
As the Brexit uncertainty cleared and a “ Boris Bounce” was being experienced within the economy, the prospects for the property market looked promising at the start of 2020. The return to increasing house prices and homebuyer mortgage approvals rocketed. Check Brickowner’s blog at the time which covered this optimism.
On the 23rd March 2020, Boris Johnson addressed to the country that people ‘must’ stay at home and strict new rules were put in place to tackle the spread of Covid-19. This included the closures of most businesses and activities, such as a ban on viewings and house moves. This brought the UK property market to a near-total standstill. Amid the lockdown period, the number of properties sold across the UK fell by 56%. As a result of the lockdown, according to a report by Zoopla, the UK’s housing market is expected to face a £27 billion deficit by the end of the year—a repercussion of several weeks of industry closure. The multi-billion-pound shortfall equates to a loss of 124,000 property sales. The graphs below show the timeline and its effect on the market.
Post Covid-19 lockdown
The rebound post-lockdown has been powered by pent-up demand from those who wanted to move before the restrictions were imposed. There is further demand from people deciding they want to move after being confined in their homes for several months.
Halifax reported that prices have returned to their highest ever level due to a mini-boom since lockdown, which saw an annual price growth of 3.8% in July, compared with the same month in 2019. Nationwide also reported a comeback, with annual house price growth at 1.5% in July, having fallen by 0.1% in June.
In terms of transactions, UK property sales in June were 36% lower than the same period in 2019 but close to a third (32%) increase on the month before. While according to the property website Rightmove, this July saw the highest number of house sales for 10 years, with record asking prices in seven out of twelve British regions.
The psychological effects of lockdown and the working from home revolution cannot be underestimated. As a result, much of the housing market is being driven by buyers who have brought forward their plans to move by months or even years. The hunger in the market is underlined by the fact that properties are selling for 98.6%of asking prices, which Hamptons says is a record high.
The market is also being supported by the Chancellor’s “Stamp duty holiday”, ensuring that an estimated 90% of home sales will now be free from stamp duty, saving buyers up to £15,000. Critically, this will also apply to both second home purchases and Buy-to-Let investors. Proposed changes to planning laws (covered in this blog recently) could open the door for recovery in the development sector, helping to underpin recent growth.
Is the property market looking at a V-shaped recovery? Looking at the above graphs and the property news, it may be possible.
Coronavirus Cases – https://coronavirus.data.gov.uk/cases
Average House Price Growth – https://www.nationwide.co.uk/-/media/MainSite/documents/about/house-price-index/2020/Jul_2020.pdf
Property Transactions – https://www.gov.uk/government/statistics/monthly-property-transactions-completed-in-the-uk-with-value-40000-or-above