Zoopla is predicting UK house prices are set to hold firm to the end of the year despite the impact of the coronavirus crisis on the economy.
Analysts at the leading property site expect market conditions to remain stronger than last year for the rest of 2020 with house prices up 2-3% by the year end despite the onset of recession and rising levels of unemployment.
The market has been bolstered by extensive government support for the economy and labour market, together with support for mortgage holders, reducing the number of forced sellers and limiting the downside for house prices, Zoopla said.
The housing market is performing at its strongest for five years, with the volume of sales agreed per agent up 76% on the five year average, even though the UK economy suffered its largest-ever contraction and officially entered a recession in the second quarter, as the coronavirus lockdown took a heavy toll on economic activity. Economic output declined by a record 20.4% between April and June, according to data from the Office for National Statistics (ONS).
It reflects “unseasonably strong” demand since the UK government eased coronavirus restrictions on home moves, with pent-up demand from lockdown fuelling the market. The cumulative increase in buyer demand since the start of 2020 is 34% higher than over the same period in 2019, according to Zoopla’s monthly House Price Index.
Demand has not been matched by a similar surge in supply, keeping annual house price growth at 2.5%.
With demand outweighing supply the amount of time it takes to sell has fallen by 31% across the UK since the market reopened, averaging just 27 days in the period since lockdown, compared to 39 days over the same period in 2019.
Surging demand also reflects a trend for people reassessing what they want and need from a home, Zoopla said. Homeowners are looking for more space and properties that compliment changing work and commuting patterns resulting from spending more time at home during quarantine.
A search for more space has led to houses selling faster than flats, with three bedroom houses selling the fastest.
Although buyer interest has fallen 17% over the past month, as the summer holiday season has softened the post-lockdown surge, demand remains 78% above last year.
Zoopla highlighted the winding down of the government’s job retention furlough scheme and other state support as the next challenge that will test the strength of economic recovery.
“The next important milestone for the housing market comes in September when schools reopen and the UK starts to get back towards a full reopening of the economy,” said Richard Donnell, research and insight director at Zoopla.
“The ‘once in a lifetime’ re-evaluation of housing requirements on the back of the lockdown will be a counterweight to the impact of the recession on housing market activity over the rest of 2020. While demand has softened over August, we expect the current momentum in market activity to continue into 2020 Q4.”