Month: June 2020

Housing market rebounds as sales increase by 137%

News 10 June 2020 10 June 2020 Business Matters

The property market has bounced back from a freeze over the coronavirus peak thanks to a build-up in demand and homeowners realising the shortcomings of their properties while cooped up during lockdown.

More homes were sold last week than this time last year and buyer demand is 54 per cent stronger than it was before the market was frozen on March 27.

Richard Donnell, director of research at Zoopla, the property portal, said that sales had risen by 137 per cent since the market reopened on May 13.

“The rebound in housing demand is not solely explained by a return of pent-up demand,” he said. “Covid 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. New sales in

London are lagging as buyers look at commuting and moving to the regions.”

The data was backed by analysis from TwentyCi, a market statistics company, which reported that 24,341 homes were sold subject to contract last week, compared with 22,880 this time a year ago.

Asking prices are 6 per cent above the level this time last year, according to Zoopla. In the week the market was frozen the average asking price was £245,000; in the week it opened last month it was £280,000, according to

TwentyCi. Anecdotal evidence suggests, however, that buyers are chipping prices down by 5 to 10 per cent.

Deals agreed have been particularly strong at the top end of the market. Those priced at more than £1 million have doubled in the past week to 664, compared with 494 a year ago. However, the largest number of sales last week — 8,956 properties sold subject to contract, compared with 7,744 this time last year — was for homes valued between £250,000 and £500,000.

Lucian Cook, director of research at Savills, estate agency, says: “That resurgence in sales at the top end tallies with our own numbers, Savills sales rose by 108 per cent last week and were particularly across the home counties where they went up by 148 per cent. This is a rebound far beyond what we expected.”

Mr Donnell sounded a note of caution, however. “The charts are off the scale but I do think this is a one-off surge in demand, a temporary jump,” he said. “No one truly knows what the economic impact [of Covid-19] is going to be.

The housing market is purely an extension of the economy and I am very cautious about the second half of the year.”

One of Britain’s biggest housebuilders has said that sales will be “severely constrained” until the lockdown is lifted.

Bellway has reported a 69 per cent drop in its weekly net reservation rate between March 23, when the lockdown started, and the end of last month.

The Centre for Economic and Business Research revised its house price forecast up from a fall of 13 per cent this year to one of 8.7 per cent.

Analysts have said the government’s furlough scheme and mortgage holidays are “softening the blow”. When they end it is feared that the market will be hit by unemployment and affordability concerns, leading homeowners to sell and driving prices down.

What impact has the lockdown had on First Time Buyers?

05 June 2020
By Daisy Stephens Really Moving.com

Reallymoving takes a look at what impact the lockdown has had on First Time Buyers, what the post-lockdown market might look like and whether homes will be more affordable.

As we gradually ease out of lockdown in the government’s three-step plan (we reached step 2 on 1 June with schools reopening and some non-essential shops set to follow later this month), the property market is bouncing back strongly, with both Rightmove and Zoopla witnessing huge spikes in buyer demand.

But how will the post-lockdown market look for First Time Buyers, one of the most important buyer demographics? First time purchasers make up a sizeable portion of the market, with research at the start of this year revealing that the number of First Time Buyers was at its highest level since 2007, before the global financial crisis took hold.

According to research from the Yorkshire Building society, there were 353,436 First Time Buyers across the UK in 2019, up marginally from the 353,130 recorded in 2018 and the highest annual total since 357,590 in 2007. Albeit still some way off 2006 levels, when the annual total stood at 400,870.

First Time Buyer demand has been driven in recent years by strong competition between lenders driving mortgage rates down to near-record lows, historically low interest rates, helpful changes to stamp duty and various schemes introduced by the government to get people on the ladder.

However, is now the right time for buyers to purchase given how much uncertainty the coronavirus pandemic has caused? And what challenges will this demographic face?

In England First Time Buyers can now purchase again

From 23 March, when lockdown began, to 13 May, when the government allowed the property market in England to reopen, First Time Buyers were unable to continue with their transaction (unless it was absolutely critical) nor kickstart their journey onto the housing ladder as the country attempted to minimise the spread of Covid-19.

Since the government green-lighted the property market’s partial return, however, there has been a release of pent-up demand and those who were in the process of buying a home in England can now do so again, albeit with various government guidelines in place on moving safely. Equally, those First Time Buyers considering purchasing a home in England before lockdown hit can now take action again.

It will be very much the ‘new normal’ in terms of viewings and communication with agents and sellers, with the government still urging that this happen remotely wherever possible. In-branch visits are on an appointment-only basis, you must never travel in your agent’s car to a viewing, you must utilise virtual viewings in the first instance until you are sure the home is right for you, and on physical viewings themselves there are a number of measures you must adhere to, including staying two metres apart, washing your hands before and after, and potentially even wearing various items of PPE.

The process could be slower as everyone adapts to their new environment, but the government suggested there were a significant number of transactions in the pipeline before lockdown, and many of these should now be able to complete, or take a step closer to completion.

First Time Buyers still have a number of advantages when buying their first home, with no stamp duty payable on homes worth up to £300,000. For homes costing up to £500,000, First Time Buyers pay no stamp duty on the first £300,000 and only pay the tax on the remaining amount, up to £200,000.

First-timers purchasing a home through Shared Ownership can also claim stamp duty relief on homes worth up to £500,000 after a government amendment in October 2018. You can find out more about stamp duty here.

There are also various housing schemes in play – from Shared Ownership to Help to Buy – and several lenders now provide 100% guarantor mortgages to help young people onto the ladder.

Interest rates being at incredibly low levels (just 0.1% in an attempt to protect the economy from the damage caused by Covid) also make borrowing more appealing, and could help First Time Buyers to get a good deal on their mortgages.

Will house prices be more affordable?
It’s likely to be unclear for some time yet just what impact the coronavirus crisis has had on house prices, with data hard to come by in recent times as the property market was effectively put into sleep mode while the pandemic raged.

However, the release of Nationwide’s well-respected monthly house price index for the month of May 2020 has revealed that house price growth slowed sharply as the impact of the pandemic begins to filter through.

Annual house price growth slowed to 1.8% in May, while prices were down 1.7% month-on-month, after taking into account seasonal factors.

Robert Gardner, Nationwide’s Chief Economist, said mortgage activity has declined sharply. “Nevertheless, our ability to generate the house price index has not been impacted to date, as sample sizes have remained sufficiently large (and representative) to generate robust results. Low transaction levels may still make gauging price trends difficult in the coming months – especially for regional indices, which by their nature have lower sample sizes.”

Gardner believes behavioural changes and social distancing will disrupt the flow of house transactions for some time, but where is next for the property market?

“The medium-term outlook for the housing market remains highly uncertain, where much will depend on the performance of the wider economy,” Gardner commented.

“We have already seen a sharp economic contraction as a result of the necessary measures adopted to suppress the spread of the virus. Indeed, the 5.9% decline in UK economic activity recorded in March was only a little less than the decline recorded over the entire financial crisis.”

However, he thinks the raft of policies adopted to support the economy should set the stage for a ‘rebound once the shock passes’, helping to limit long-term damage to the economy.

“These same measures should also help ensure the impact on the housing market will ultimately be less than would normally be associated with an economic shock of this magnitude.”

It’s commonly accepted that we’re already in a recession, as vast parts of the economy are still effectively shut down, but the concern is that this will move into a depression – with potentially devastating effects.

That said, the government – through initiatives like the Job Retention Scheme, the Business Interruption Loan Scheme, mortgage holidays, VAT deferrals and the Self-Employment Income Support Scheme, not to mention the cuts in interest rates – is attempting to limit the economic shock, to keep unemployment down and to try and get the economy back on its feet as soon as possible.

Many First Time Buyers may have been furloughed or work in an industry – such as travel, the arts, hospitality or sport – which has been severely hampered by the pandemic, in turn meaning they are less willing or able to continue with their home-buying dreams.

But it’s hoped the various support measures the government has put in place will prevent mass unemployment and major financial complications from being an issue.

There is a chance houses could be more affordably priced in the short to medium-term, as sellers become far more eager to sell quickly and buyers are put in a stronger negotiating position, but we’ll need a few more months of house price data to know for sure.

Demand recovery well underway, portal date shows

On Wednesday 27 May, only two weeks after the property industry in England restarted, Rightmove witnessed visits to its site surpass six million in a day for the first time, up by 18% on the comparable day of 2019.

On Saturday 23 May, the portal recorded its busiest ever day with regards to time spent on the site, with over 47 million minutes spent collectively.

Rightmove says home-mover momentum has been building since the housing market reopened in England, with ‘a new wave of buyers now entering the market’ since the easing of lockdown.

The findings also revealed that more a quarter of buyers who had no plans to relocate earlier in the year are now planning to move.

Meanwhile, Zoopla’s latest Cities Index Report recorded a surge in activity from buyers, sellers and those in the private rented sector in May.

Buyer demand increased by 88% in the week after the government’s housing market announcement. While this spike in part showed how low the market had fallen, Zoopla expects this upwards trend to continue, albeit at a steadier pace over time.

The north of England and a number of coastal towns saw a huge revival in demand, the report said. By contrast, there was a much smaller rebound in demand for London property.

With the Yorkshire Building Society data showing that those entering the property market for the first time accounted for more than half (51%) of homes purchased with a mortgage in 2019, there is a strong likelihood that a significant number of these buyers are of the first-time variety.

It should also be noted that some developers, agents and schemes are offering discounts and special offers for NHS and key workers, who have been at the frontline of the pandemic. If you are a First Time Buyer and a key worker, it’s worth exploring whether there are any offers or discounts being provided in the area in which you are looking to buy.

UK house prices 2020: how has coronavirus affected the housing market so far?

By Carol Lewis Sunday June 07 2020, 12.01am, The Sunday Times

We’re still in the “discovery phase” and opinion is divided, but here’s what the latest numbers show.

However, buyers are having none of it. “Since the market burst back into life halfway through [last] month, 79% of buyers who had already agreed purchases before lockdown tried to reduce their price. Most succeeded, but not on the scale they were expecting,” says Lucy Pendleton, managing director of James Pendleton estate agency. “In all, 99% of them failed to achieve a reduction of more than 2.5%. The only exception has been a 6% reduction on a house that had been listed for sale at £2.5m.”

Aneisha Beveridge, head of research at Hamptons International, says that in England sellers went from achieving 98.9% of their asking prices in January and February (a discount of 1.1%) to 97.1% last month (a 2.9% discount).
Savills, which tends to sell prime properties, reports a slightly larger discount of 5% now, compared with 2% before the freeze. At Knight Frank, average discounts on London properties of 6.4% during the freeze have narrowed to 5.5% since the market reopened.

So, where have the much touted discounts of 10-15% gone? “Some buyers are very optimistic and trying for double-digit reductions on asking prices, these are often rejected and more sensible negotiations follow,” says Tom Bill, head of London residential research at Knight Frank. “At the other extreme for best-in-class properties you are actually seeing competitive bidding that usually starts at or above guide prices. We have deals agreed pre-lockdown, renegotiations, optimistic discount bids and competitive bidding all going on at once. It will take a while for things to untangle and the market to find its feet.”
The opening of the market unleashed a wave of pent-up demand, but this has not been matched by a wave of sellers willing to sell at any price. Data from View My Chain shows that new listings are down by a third on usual levels.
Richard Donnell, research and insight director at Zoopla, says: “Demand rebounded strongly with an initial surge as the English housing market reopened and is now 34% above early March.”
This strong demand is holding up prices — for now.

Nonetheless, the publication of the first set of house-market indices since the unfreezing of the market made for sensational headlines last week. Nationwide’s data suggested that house prices had fallen by 1.7% from April to May, the biggest monthly drop for more than a decade, wiping £4,000 off the value of the average property. However, Halifax reported a much more subdued 0.2% drop in house prices over the same period.
The average asking price of a property now, according to Nationwide — whose calculations are based on its mortgage lending — is £218,902. The lowest it has been since February, when it stood at £216,092.
Despite the reported fall in values in the past month, Nationwide reports that house prices are now 1.2% higher than they were three months ago and 1.8% higher than a year ago. Halifax’s data puts the average value at £237,808, 2.6% higher than a year ago.

However, a key problem with the Nationwide and Halifax research is that it is based only on mortgages that they have agreed and from a time when transaction levels were very low. During the seven weeks the property market was closed, an average of 3,809 sales a week were agreed in the UK (this fell to just 3,125 a week in April). This is less than a fifth of the usual number.

Andrew Goodwin, senior economist at Oxford Economics, says: “The figures for the past month are almost meaningless because there were so few transactions. Prices only go down if people are forced to sell, if they are unemployed so can’t pay the mortgage, or are hard-up, so can’t service their debt. I don’t see a lot of people losing their jobs while the furlough scheme is running, and while we have low interest rates and mortgage holidays there is no incentive to sell up.”

He predicts that prices will remain flat this year with lower house prices next year. He says prices will be only 3% lower if unemployment, which is now at about 4%, doesn’t rise beyond 6%.

The Centre for Economic and Business Research (CEBR) said on April 14 that property prices would fall 13% by the end of 2020. On April 20 Rishi Sunak, the chancellor, launched the Coronavirus Job Retention Scheme.
This week the CEBR revised its forecast to a fall of 8.7% this year. Kay Neufeld, head of macroeconomics at the CEBR, says that there will be a gradual decline in house prices this year and that there could be “a bit of a cliff edge” when furloughing comes to an end. “We are still at the start of a major recession and as soon as the job-retention scheme comes to an end we could see a reduction in household incomes and reduced demand for housing,” Neufeld says.

Bill agrees that there is a bumpy road ahead for the housing market. “Over the summer I think we might see some pretty nasty GDP data, which could tip us into recession, and that will negatively impact on sentiment, which will inevitably have a knock-on effect on the housing market. Then the furlough scheme will unwind and we will see how that affects employment,” he says.

What of the thinking that we are in a three-month buying opportunity? Few experts believe that it is that simple; prices are likely to fall farther yet, although how far may not be apparent until the autumn.
Lawrence Bowles, research analyst at Savills, says that he expects to see people sell now and buy later — renting in between, particularly if they want to test out a new location.

Jonathan Mount, managing director of Sterling Private Office, a buying agency, says: “If you find something that might not come back to the market for years don’t delay. If it is going to be your home for a long time, then there is no point waiting. If it is a pure investment play, then hold off and see what happens.”

@CarolLewis101