According to Nicky Stevenson, MD of Fine & Country UK, the upper quartile of the market is performing particularly well as demand for prime property soars with existing homeowners using this moment to move to a new house.
Nicky explains: “This summer was a particularly busy time in the housing market this year, with the momentum seen post lockdown continuing into August. According to Zoopla, since the start of the year buyer demand is 39% higher than the same time last year, resulting in an increase in newly agreed sales and mortgage approvals.
“The Bank of England reported that 84,715 mortgages were approved in August, representing an annual increase of 28.9% and newly agreed sales so far in 2020 are 3% higher than the same time last year. These are very impressive increases considering the housing market paused during lockdown.”
She adds that HMRC estimate 81,280 transactions were completed in August, a -16.3% annual decrease. Transaction figures lag mortgage approvals and newly agreed sales as it takes time for sales to complete, on average nine weeks from offer accepted to contracts exchange.
Nicky continues: “Data from Zoopla shows that the number of properties for sale is 10% higher than last year, a result of buyers bringing their homes to the market. Despite this increase, demand is still running ahead of supply, in turn causing house prices to increase. The NAEA has reported that 1 in 8 homes sold for more than the asking price in August and Nationwide reported a 5.0% annual increase in house prices in September and a monthly increase of 0.9%."
So, who is driving buyer demand in the current market? Stevenson answers that the increase in housing demand varies according to buyer type.
“Zoopla has reported that first-time buyer demand spiked straight after lockdown, however, momentum has fallen back to pre-covid levels. Many first-time buyers will have been deterred due to continued economic uncertainty and the reduction in higher loan-to-value mortgage products available. However, first-time buyer demand still remains higher than in 2019. On the other hand, existing homeowner demand has surged since lockdown. Demand is 37% above pre-lockdown levels and 53% above last year."
She reasons that the shift could be due to that fact that for many existing homeowners affordability is much less of an issue. According to the English Housing Survey, 34% of households are owned outright. Prime properties have seen the largest increase in demand, 4-bedroom detached homes and larger, have seen a 104% increase in sales agreed in August compared to last year. Three and four-bedroom homes (excluding four bedroom detached) have seen a 55% increase in sales agreed. August prime property prices in the UK increased by 5.08% annually, with the average prime property selling for £1,039,950.
What can we expect in the months to come?
Stevenson says: “Looking ahead, the increased housing demand is likely to be maintained as six months of the stamp duty holiday remain and further Covid-19 restrictions will cause households to continue to re-evaluate their lifestyles. We are likely to see continued changes in buyer priorities with 83% of agents predicting demand increasing for homes with gardens over the next two years, 80% also expect increased demand for homes located near green space. Space for working from home may become more important and commute times less important.”
She concludes: “As long as buyer demand outruns supply, house prices will remain strong. The August RICS survey reported +22% of agents expecting house prices to increase over the next three months and +27% expecting prices to increase over the next twelve months."
