Average house prices are up 2.7% on the year and sales activity has rebounded strongly post-lockdown.
The property market has been affected by lockdown, especially when it comes to the balance of housing supply and demand, according to the latest Zoopla House Price Index.
House price growth
The annual rate of growth edged up to 2.7% in June, after rising 0.2% on the month. Price growth is highly localised, but there is little evidence of material declines at regional or city levels, although a small proportion of local areas are seeing price declines of up to -0.2%.
Why are house prices increasing?
Buyer demand has risen strongly since housing markets reopened, as shown on the purple bar in the chart below. Although the number of new homes being listed for sale has also risen, it hasn’t increased by the same margin. This creates an imbalance of low supply and high demand - and contributes to house price growth.
This imbalance is most stark in cities in the North of England, including Manchester, Liverpool and Sheffield, and it is notable that these are in the top six cities for levels of annual house price growth.
The stamp duty effect
The biggest change in the market spurred by the Chancellor’s announcement of a stamp duty holiday for England and Northern Ireland has been seen in London. Sales jumped by 27% in the weeks after the change. Given the higher average house prices in London and the South East, these are where the largest benefits from the stamp duty holiday will be felt. The stamp duty holiday will continue to support demand in these higher value markets.
What does this mean for the rest of the year and into 2021?
Richard Donnell, director of research and insight at Zoopla, shares with us his outlook for the market and for house prices in 2021.
He says: “COVID and the lockdown have shifted the dynamics of supply and demand across the housing market.
“The staggered reopening of housing markets across countries and the added impetus from the stamp duty holiday mean we expect buyer demand and new sales volumes to hold at current levels over the next two months. The net result will be continued support for house price growth at current levels over the second half of the year. Regional cities in northern England and the Midlands have the strongest underlying trends.
“We expect rising unemployment to weigh on market activity over the final quarter of 2020 and into the first half of 2021. Further government support for the economy cannot be ruled out however, while forbearance by lenders, and the availability of the mortgage payment deferrals, which can start up until the end of October for three to six months, is likely to limit the scale of downside for house prices. Much depends on how businesses respond to the outlook and their decisions on staffing levels and the knock on impact for unemployment.”
Key takeaways from the report:
Average house prices up 2.7% on the year, after a 0.2% increase during June as post-lockdown momentum continues to support prices.
Sales activity has rebounded strongly post-lockdown, although the number of sales agreed in the year to date is still 20% lower than over the same period last year.
Stamp duty changes have delivered an immediate boost to sales levels in London.
Sales volumes for the year will be around 15% lower than 2019, a much improved outlook compared to a few months ago.