In our second Q&A with Richard Donnell, Zoopla’s director of research & insight, we ask about the reopening of the market and what it means for housing demand and prices.
Last week, the government reopened the housing market.
With estate agents allowed to open their premises, and viewings restarting with social distancing, you’re finally allowed to move home again.
But what happens next? Richard Donnell answers our top questions...
Q. What does the government announcement mean for the market?
Richard Donnell: By acting quickly and reopening the housing market before other parts of the economy, the government has improved the chances that a higher proportion of the some 373,000 sales that were suspended due to coronavirus lockdown will be able to progress.
Initial data suggests that activity levels, and certainly indicators of demand in the market, rose sharply in the second half of last week.
Q. How far did demand rise?
RD: Our own data showed that pent-up demand for housing has been building over several weeks.
On a rolling seven-day basis it’s now within 30% of the levels seen last year.
However, the government announcement resulted in a 35% increase in demand in a single day.
Q. Will the housing market simply pick up from where it left off?
RD: Amid rising demand for housing, we must remember that the forecasts for the economy still look challenging and measures of consumer confidence have dropped.
However, there’s another question worth considering. And that’s just how much COVID-19 and the lockdown will make households reconsider their housing needs - creating a one-off boost in housing demand.
For instance, the length and frequency of some households’ commute into work could now permanently change. So demand could start to rise in parts of the country which traditionally have been beyond the ‘commuter zones’ for workers based in urban centres.
Equally, many people will be assessing the importance of the space in and around their home, which could prompt an impetus to move.
Indeed this could be one factor feeding into the stronger than expected rebound in demand seen recently.
Q. How will the coronavirus lockdown impact house prices?
RD: With the economy set to move into recession, most forecasters are suggesting average house price falls of up to 10% across the UK during 2020.
New forecasts tend to be at the higher end of the range. These are based on the historic, long-run relationship between house prices and economic growth.
Yet not all downturns are the same. Each has different drivers and characteristics.
Firstly, market activity and pricing levels were not running away and 'super-overheated' before the COVID crisis hit.
London’s market has been weak for four years with sales down 20% on 2015 levels with real price falls.
Perhaps more importantly, mortgage affordability tests have stopped households bidding up prices to excessive levels that would increase the chances of large price falls.
Finally, the support of the government for the economy is very important and we should not rule out the fact that they could well go further to support the market and reduce the scale of the economic impact.
Q. What happens next in the market?
RD: It’s such welcome news the market is open for business, but the reality is that it’s going to be a slow start as the market rebuilds momentum.
Schools and many work places remain closed.
It will take time for the industry to restart, and agents will be keen to ensure they abide by all the guidance from the government about how to conduct business and ensure offices and work practices remain safe - including how staff feel about going back to work.
We still believe that overall housing sales will be down 50% over 2020, with total transaction numbers at around 600,000.
Our current forecast is for total transactions to be down around 50%, although this will be dependent on market activity in the months to come.
But the data from Zoopla’s platforms will provide us (and the industry) with an ongoing picture of how the resumption of market activity is unfolding.
Thank you, Richard.