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Housing Market Catching up but Uncertainty Remains

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Latest figures show the housing market is catching up lost ground but is still likely to end the year with fewer sales than in 2019.

Property website Zoopla predicts the 2020 decline will see house sales down by 124,000, with a potential combined worth of £27bn, 15 per cent lower than in 2019.

Government changes to stamp duty have helped boost the market in London, but had had less impact on sales in regional housing markets, said Zoopla.

The problem seems to be supply rather than demand, with current growth in demand ahead of last year.

The net result has been an increase in house prices. Zoopla’s UK house price index put the July annual growth rate in prices at 2.7 per cent on the back of the strong start to the year. The monthly rate is put at 0.2 per cent, half that of June.

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

‘Based on current trends, 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’.

Zoopla research and insight director, Richard Donnell, the Coronavirus crisis had changed 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 sizable 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’.