Homebuyers, house hunters and investors – if you’re wondering what will happen to the UK property market post-lockdown, you’re not alone.
Pretty much everyone with even a passing interest in property is pondering the same question.
So what should we expect from the UK property market post-lockdown?
Firstly, let’s have a quick recap of how the property market was just before the lockdown.
Summary of UK market pre-lockdown
Here are some of the key numbers that were defining the UK property market prior to the 8-week lockdown:
- 200,000 people were in the process of buying or selling
- 200,000 were planning to buy or sell next month
- 480,000 people had their homes on the market
- 1.2M+ people looking for a new home
- Half of the 4.8M self-employed own a home & may need to borrow against it
Looking at this data clearly indicates that the UK property market was in a very active state before Covid19 closed the country down. Now, let’s focus our attention on the current state of the property market since the ease of the lockdown.
Current state of the UK property market
Following the Government decision last month to release the property market from lockdown, a wave of pent-up activity has hit the market. Online property searches soared following the announcement – with Rightmove reporting over 5 million visits the day after the market reopened.
- 386% increase in properties coming to the market
- 30% more properties progressing to Sold STC (Subject to Contract)
- 88% increase in demand in England
With demand hitting a new high, now seems to be an ideal time for sellers to list their home to take advantage of the increase of buyers and favourable mortgage offerings hitting the market as the economy begins a recovery from coronavirus.
Optimistic home sellers have been bumping up asking prices despite the coronavirus crash that has hit the economy, new figures from Rightmove show.
The data came as upmarket estate agent Knight Frank said it had its best ever week outside London, with buyers flooding back to pricey country properties after the lockdown property freeze. Furthermore, offers accepted outside of London were the highest on record and more than 50 % above the five-year average, according to agent Knight Frank.
Sellers putting their homes on the market are pricing higher than they were in March with the average asking price for newly listed properties in early June 1.9% – or £6,266 – higher than in March at £337,884.
However, it is worth noting there were 175,000 sellers missing from the market – those who would have put their homes up for sale were it not for the property market being frozen at the start of lockdown. In addition, asking prices are always expected to rise over the spring and summer period, which is traditionally the busiest for the property market.
It seems, so far, that the activity in the housing market is bouncing back after viewings were put on hold for 8 weeks. A total of 40,000 sales have been agreed since the market reopened a month ago, this was down 36% on the same period last year. Rightmove said it had recorded its busiest ever ten days in May and June, which it said reflected two months of pent-up demand.
Finally, the Chancellor Rishi Sunak’s announcement on 8th July 2020 to temporarily remove the Stamp Duty Land Tax (SDLT) until 31 March 2021 on property transactions costing up to £500,000, in an effort to revitalise the housing market, will be welcomed as good news for homebuyers and house hunters. This means 9 out of 10 people buying a property will pay no SDLT while the change is in effect, while those paying will typically save an average of £4,500.
It’s business as usual for UK estate agents
Estate agents from all across the UK appear to be really busy. In fact it transpires they are busier than ever.
They are continuing to see strong activity in the housing market, with lead indicators showing that over the past 4 weeks the number of sales agreed throughout the UK has been some 26% above this time last year. This increase reflects both the release of pent up demand and a greater resolve to move amongst those with the financial resources to do so, following the experience of lockdown.
In the prime housing markets, activity has even been more robust. According to an analysis published by data agency TwentyCI there have been 2,682 sales agreed at over £1 million in the past 4 weeks, which is 49% higher than this time last year, having risen by 8% last week alone.
Although activity levels have been strong, in recent weeks both Nationwide and Halifax reported falls in the average value of UK homes in June, with Nationwide also noting that annual price movements have now dipped into negative territory in certain regions of the UK.
Property valuations remain a big sticking point
Despite positive signs of recovery for the housing market, there are already warnings about the rising risk of down valuations: valuations are the big sticking point, with recent comparisons hard to fathom.
Home valuations are a fundamental aspect of the housing market. Mortgage lenders rely on them to assess how much risk they are taking on when approving a mortgage application or remortgage request.
And it appears lenders remain deeply worried at how accurate valuations can be without comparable sales prices available for a post-coronavirus housing market. It is a completely new territory. So much so that the Bank of England was prompted to issue guidance on how and when to value properties that underlie mortgage loans on lenders’ balance sheets to address the concerns from banks and building societies.
As a result property valuations are greatly at risk of potential down valuation due to the lack of clarity on the property market. This has obvious implications for homeowners hoping to sell and for hopeful buyers and the first signs are already visible with property transactions agreed before the crisis being renegotiated as buyers fear their offers are no longer accurate.
As a buying agent, my advise to any property buyer is to be very mindful about valuation and what estate agents say or claim on the subject, as it is far too early to know where prices really stand. Asking prices post lockdown remain the same as they were in March but the data that really counts is sales prices, once property transactions have been agreed, exchanged and more importantly completed and registered by Land Registry.
And buyers, remember, a property is only worth what someone is willing to pay for it, not what an estate agent claims it is worth!
What does the future holds for the UK property market?
This is the million dollar question and despite various property experts analysis, no one really knows what is around the corner and how the UK property market will react in the coming months.
Analysts forecast house prices to fall due to the coronavirus crisis and lockdown, with estimates ranging from Knight Frank’s prediction of a 5% to 7% decline to the Bank of England’s 16% drop.
But agents selling upmarket homes outside of London reported that early business has been brisk since the property market was unfrozen a month ago and viewings could begin again.
House prices outside of London are proving more resilient in part because of a ‘trend for more buyers to seek outdoor space’. Lockdown has made buyers re-evaluate what they want from a house and workers believe they will make fewer daily journeys into city centre offices.
Overall the UK property market is now back and running with an increased level of activity; but will this be sustainable in the medium and long term? No, would be my short answer as I anticipate property prices will be determined by the depth of any recession and level of unemployment later in the year.