Head of research, reveals what’s behind a busy end to the year.
Q. Why is overall buyer appetite still higher than this time last year?
A. Buyer demand soared during the summer after lockdown, but has since moderated – even so, it is still 34% higher than this time a year ago.
The first shutdown of the housing market earlier resulted in a build-up of demand which has come back to the market since then. The Chancellor’s stamp duty holiday has also acted as an incentive to move home now, with the average bill falling by £4,500.
The pandemic has been the catalyst for more longer-term trends too, however. Continuing lockdowns and restrictions, as well as the shift to working from home, have meant that people are re-assessing what they want in a home, with some homeowners carrying out a once-in-a-lifetime re-evaluation of how and where they want to live.
Q. Will this trend continue over the next few months?
A. Absolutely. Buyer demand levels are set to hold firm for the rest of this year. There’s also a cohort of buyers – those carrying out a major re-appraisal of their homes and lifestyles – who will still want to move home beyond the stamp duty holiday deadline in March next year. The continuing restrictions, coupled with new working practices for many office-based workers which are probably here to stay, are continuing to prompt more re-evaluation of home.
Q. Is the number of homes coming onto the market soaking up this demand?
A. Yes, the elevated levels of buyer demand are encouraging more people to put their homes up for sale – many buyers are sellers, too.
This combination of sustained buyer appetite and more homes on the market has boosted overall activity levels.
The number of new sales agreed is running 38% higher than a year ago – and we expect this trend to continue in the weeks ahead.
Q. What’s the forecast for Christmas and the new year?
A. Busy! Activity in December – and the run-up to Christmas – is expected to be the strongest in more than a decade.
The pipeline of sales is now nearly 40% bigger than this time last year. The overall number of homes sold in 2020 is set to be 1.1m in 2020 – just 6% lower than in 2019. It’s remarkable given the outlook – and the complete closure of the housing market – earlier this year.
Perhaps unsurprisingly though, the number of homes sold in Scotland, Wales and Northern Ireland is expected to be lower than last year by up to 12%, because their housing markets were shut for longer than England’s.
All of this activity has meant that annual house price growth is now 3.5%, the highest for almost three years. Some 80% of privately-owned homes are in areas where annual house price growth is more than 2%.
We expect UK annual house price growth to hit 4% by the end of the year.
Sales will spill over into the new year as buyers rush to beat the stamp duty holiday deadline, with 100,000 additional transactions set to complete before the end of March.
But of the sales agreed in January, we expect just half to complete in time to get the tax break.
Q. With projections that house price growth will be 4% by the end of the year, how resilient is the housing market?
A.The housing market has been one of the bright spots of the economy this year. And this has been reinforced by the government which – after the first lockdown – has kept the housing market open for business.
Lockdowns and restrictions as well as changing working patterns as a result of the pandemic have prompted a complete sea-change in the way people view their homes, and this will continue to support the housing market.
It’s also worth noting that while first-time buyers and those with small deposits have been hit by growing economic uncertainty and reduced mortgage availability, existing homeowners – particularly second and third steppers – are becoming more interested in moving up the housing ladder. These wealthier demographics aren’t so sensitive to wider economic headwinds and are buying homes with bigger price tags.
Q. What’s in store for the housing market in 2021?
A. A significant number of sales will go over the line in the first few months of the year as the stamp duty holiday draws to a close. We expect this to level off as normal stamp duty is re-introduced.
The overall number of homes sold in 2021 are set to be in line with 2020. Meanwhile, we predict annual house price growth will be at 1% by the end of next year as weaker market sentiment and economic uncertainty eases the upward pressure on prices.