Jul 2020 House Price Watch
House prices recover in July and transactions are on the rise after the lockdown slump - but what is driving renewed activity and what is the outlook for the near and medium term? Let's take a look at the latest house price reports and what the experts say.
A jump in house prices and more activity – but uncertainty over the long term outlook for the housing market
Experts are somewhat surprised by the extent of the recovery to the housing market in July. Official transaction figures for July are yet to be confirmed but buyer enquiries and seller instructions are up sharply. Pent up demand, a renewed interest in moving as a result of life in lockdown, and the stamp duty holiday all seem to to be fuelling activity. But, there is caution as to how long the demand will last as the government furlough scheme comes to an end in October and the fallout to the labour market becomes clearer.
House prices increase in July for the first time since March
House prices are up year on year in most UK cities
Latest house price data from Hometrack shows an uptick in house prices across the cities and with the Northern cities experiencing the biggest year on year price increases.
Transaction levels are returning with with new buyer enquiries and sales instructions up significantly in July
The RICS residential market survey reports that new buyer enquiries and new sales instructions have rebounded following the lockdown induced slump and this trend is expected to continue for the next 3 months.
Property Transaction data is not yet available for July but June data shows a significant recovery from lockdown levels (up 32% on May) but still below March.
What the indices say?
HomeOwners Alliance: “July signals a rebound in market activity and a rise in house prices. The renewed activity is a result of pent up demand after lockdown and that more people want to move after experiencing life in lockdown in their home. The time-limited stamp duty holiday is encouraging people to take the final step and list their property and/or look for a new one now. What is less clear is what will happen in the future and when the aftereffects of the pandemic on the economy and jobs become clear.”
Nationwide: “The bounce back in prices reflects the unexpectedly rapid recovery in housing market activity since the easing of lockdown restrictions. The rebound in activity reflects a number of factors. Pent up demand is coming through, where decisions taken to move before lockdown are progressing. In addition, 15% of people are now considering a move as a result of life in lockdown. Moreover, social distancing does not appear to be having as much of a chilling effect as we might have feared. These trends look set to continue in the near term, further boosted by the recently announced stamp duty holiday, which will serve to bring some activity forward. However, there is a risk this proves to be something of a false dawn. Most forecasters expect labour market conditions to weaken significantly in the quarters ahead as a result of the aftereffects of the pandemic and as government support schemes wind down. ”
Halifax: “Following four months of decline, average house prices in July experienced their greatest month on month increase this year. The latest data adds to the emerging view that the market is experiencing a surprising spike post lockdown. As pent-up demand from the period of lockdown is released into a largely open housing market, a low supply of available homes is helping to exert upwards pressure on house prices. Supported by the government’s initiative of a significant cut in stamp duty, and evidence from households and agents suggesting that confidence is currently growing, the immediate future for the housing market looks brighter than many might have expected three months ago. However, looking further ahead, there is still a great deal of uncertainty around the lasting impact of the pandemic. ”
Rightmove: “The unexpected miniboom continues to gather momentum. Overall buyer enquiries are up by an incredible 75% year-on-year. The ‘busy until interrupted’ spring market has now picked up where it left off and has been accelerated by both time-limited stamp duty holidays and by homeowners reappraising their homes and lifestyles because of the lockdown. The strength of buyer demand has contributed to record prices, with the 3.7% annual rate of increase being the highest for over three and a half years. These figures are the earliest indicator of house price trends. They show on average prices gently rising not falling.The immediate effect of the stamp duty cut in England has been to amplify the buyer surge. The number of sales agreed in the five days after the announcement (between the 8th and 12th July) was up 35% on the same days a year ago. ”
RICS: “Our survey results show that the ongoing recovery in sales market activity has gained further momentum over the month. Anecdotal evidence suggests the Stamp Duty holiday, introduced from the 8th July, is playing a significant role in lifting demand. That said, despite the recent pick-up, respondents are circumspect on the prospect of this impetus being maintained once wider government support measures are phased out across the economy later in the year.”
What does the future hold?
As the news hits that we are entering into a self-induced recession, it is impossible to predict where we will be this time next year. This is what the experts say and you can see that there is little consensus and forecasts are being constantly revised.
Resolution Foundation – the ongoing recession may see property prices plunge by 22%
Office for Budget Responsibility – property prices will decrease by more than a fifth by Autumn 2021 and only then will a long and slow increase in property values will take hold
Knight Frank – estimates a 3% dip across the UK, but forecasts that London house prices will jump 6% in 2021.
Savills – expect that falls in the average value of the UK home to be contained to 5-10%.
To see previous House Price reports click here