House prices are set to hold steady for the remainder of 2020 despite the onset of recession and rising unemployment, according to the latest House Price Index by Zoopla.
Despite the current recession, Zoopla claims that Government support for the economy and labour market together with support for mortgage holders, has reduced the number of forced sellers and limited the downside for house prices. The index predicts that house prices will end the year 2% to 3% higher than at the start.
The cumulative increase in buyer demand since the start of 2020 is +34% higher than over the same period in 2019, above the +25% that Zoopla published last month. The data shows that despite the impact of lockdown leading to the supply of new homes for sale being below volumes recorded last year, the gap is closing steadily.
In addition, the time to sell a home has reduced across all UK regions and countries. 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 tell a property in the last 90 days has been 27 days, compared to 39 days over the same period in 2019.
The search for more space in properties also sees houses selling faster than flats according to the index. Three-bedroom houses remain the fastest selling property on the market, with an average time to sell of 24 days since the lockdown lifted. Whilst this type of property are the most in-demand property type, the proportion of available supply falls short of demand across all parts of the UK which is supporting faster sales periods.
Four and five-bed houses are selling 33% faster than in 2019, whilst flats are taking the longest time to sell at an average of 32 days. The flow of new property supply is running 54% ahead of this time last year, but overall stock per agent remains 3% lower.
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 Q4 2020.
“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.”