With the spring market showing signs of improved consumer sentiment following the election result, 2020 was expected to be the year the property market regained the traction lost due to Brexit uncertainty, with promising figures in the first quarter confirming as such. During spring, the market experienced annual house price growth of 2.1% and an annual increase of 3.7% in mortgage approvals during the first quarter of this year, despite the fall in March. The strongest growth in the market was seen in London and the South West.
Comparatively, the spring market in the North East saw a 1.8% increase in annual house price growth in March whereas Yorkshire saw a 1.0% decrease. Both figures are lower than the UK average.
“As we all know, the pause button was pushed on the housing market as the UK went into lockdown on 23rd March. This resulted in a -9.8% drop in transactions in March, with April volumes around half of the level they were last year,” says Lindsay French.
On 11th May, the government announced the UK COVID-19 exit strategy and England’s residential market went back to business on 13th May. “Enquiries rushed in on the first day of the housing market reopening in England with Rightmove reporting 5.2 million visits to their site, up 4% on the same day last year. This flurry of activity and release of pent-up demand will help get the market back on track. Based on the Dataloft statistics, I believe transactions will take approximately six to nine months to reach pre-COVID levels and prices will take around 11 months. Long-term price growth expectations are similar to pre-COVID levels, with an average growth of just over 2% per annum over the next five years according to RICS Lindsay adds.
During the lockdown, agents across the UK reported that demand in the rental market weakened with fewer landlord instructions. “This is no surprise considering the restrictions on people not being able to move. Despite this, rents increased by 1.5%, however, it can take time for supply and demand pressures to show. Based on the statistics we have seen, we expect some rental falls in the coming months, but the long-term projections stand at 2.5% per annum over the next five years. With 39.5% of existing tenancies set to expire in Q3, it will be a busy quarter for lettings agents,” says Lindsay.
“When it comes to house prices going forward, it is too early to tell the magnitude of the impact COVID-19 will have, but they are likely to be protected from major falls as, unlike previous downturns, house prices have been relatively stable. There is a good balance between supply and demand and banks are still lending with fixed mortgage rates at an all-time low based on interest rates of 0.1%.”
Lindsay says that looking at consumer research, it is clear that the pandemic has impacted buying patterns and behaviour. “COVID-19 has had a massive impact on all of our lives and over the last few months, many people have re-evaluated their idea about what they want in a home. The pandemic has left a legacy when it comes to property buying patterns with the importance of outdoor space increasing. Currently, only 66% of flats have access to private outside space, compared to 97% of houses. We may see a shift in building design and the premium already established for homes within proximity of green space could increase. The lockdown has also proven to many sceptics that working from home is viable and even convenient. Before COVID-19 only 5% of people mainly worked from home and less than 30% had ever worked from home. We don’t expect the end of offices, as many miss them, and they have great social benefits. However, working from home could become more common and with it, the relative importance of commute times, broadband speeds and space for a home office,” Lindsay concludes.