Housing market activity has come full circle in 2020 and will end on a high, despite a two-month market closure borne of the pandemic, according to findings from Zoopla’s monthly House Price Index.
The report shows that market conditions continue to defy the traditional festive lull with demand in the last four weeks up 33% on the same period in 2019, when the market was preoccupied with the General Election.
Across the whole of 2020, the year showed 40% more demand for housing than in 2019, despite all activity ceasing during the 2+ month housing market closure. This appears to have been fuelled by a search for space and desirability of location – with the pandemic and its subsequent lockdowns having unlocked latent demand for housing with even more focus on the size and quality of homes, and stimulating more decisions to move.
However, while demand is up 40% over 2020, the flow of new supply has increased by just 4%, creating a supply and demand imbalance, and enacting an upward pressure on house prices.
The COVID crisis has also driven a shift in the demographic profile of home movers, with a notable increase in more affluent demographics, where house prices are typically higher.
More sales agreed at a higher price point means the monetary value of homes selling is 26% higher in 2020 than in 2019. This equates to an additional £62bn of sales, which will take the annual total of homes sold this year to over £300bn.
The fundamental search for more space that has characterised the pandemic fuelled market has resulted in the average rate of growth for houses running at double the rate of growth for flats.
As households re-evaluate their housing needs, demand for family houses with gardens, parking and extra space to work from home has intensified.
The once in a lifetime reassessment of housing has further to run as households look to the future and reflect on their housing priorities, particularly in light of the seemingly ongoing restrictions.
End of year market momentum is expected to support a seasonally strong start to 2021, with more mature, equity rich, long-time homeowners continuing to take a growing share of sales. Improved availability of higher loan-to-value mortgages for those with deposits of 10% or more are already increasing, which will support first-time buyers over the next 12 months.
With a long Christmas weekend and many households isolating in smaller groups, Zoopla says it expects interest in housing to be stronger than usual ahead of the traditional Boxing Day bounce, when interest spikes and the next tranche of households start planning their next move.
Richard Donnell, Director of Research & Insight, Zoopla added, “The housing market is ending 2020 strongly with more buyers looking for a home than this time last year. More sales at higher prices have boosted the value of homes selling in 2020, led by a strong rebound in southern England.
“The ‘once in a lifetime re-assessment of housing’ kick-started by the pandemic has further to run in our view and this will support demand into 2021. With a long Christmas weekend, and many households isolating in smaller groups, we expect interest in housing to be stronger than usual ahead of the traditional Boxing Day bounce when interest in housing jumps and the next tranche of would-be buyers.
“While market activity is being boosted by latent demand unlocked by the pandemic, the housing market is not immune to economic forces and rising unemployment. Economic pressures are already impacting in parts of the market, reducing the volume and share of sales in less wealthy areas, for example.
“Looking ahead to 2021 we expect house price growth to reach 5% by mid Q1 and then slow to +1% by the end of the year as demand starts to weaken over 2021 H2. The number of completed housing transactions will be buoyed by a strong Q1 with sales agreed over 2020 Q4 completing early next year. Overall, we expect the number of completed housing transactions to match 2020 levels at 1.1m.”
Leave a Comment