The rebound in housing market activity continues across the UK, according to the latest Zoopla House Price Index.
The number of agreed home sales is up 4% compared to pre-lockdown levels in early March, and house prices are up 2.4%.
The strongest rebound in sales has been in cities in northern England, including Leeds, Sheffield and Manchester. This rise in sales activity is being driven by the level of buyer demand and low availability of housing.
Demand continues to surge
The level of buyer demand across the UK is 46% higher than it was in early March, when demand for housing fell by 70%.
Buyer demand has also increased in Wales. This was likely in anticipation of the Welsh market reopening on 22 June.
Buyer demand moderated slightly during June. This was expected given the huge growth in demand since the English housing market opened in May.
The Scottish market is due to open at the end of June. We expect there to be a similar rise in demand in Scotland as we've seen in England over the last month.
Richard Donnell, director of research and insight at Zoopla, says:
“The rebound in housing market activity has taken many in the industry by surprise. It is welcome news given the projections for falling economic growth and rising unemployment.
“Estate agents and developers are responding and using the upsurge in demand to rebuild their sales pipelines and open up their developments.”
The wider trends in UK activity will largely be driven by England, as this market accounts for 80% of property transactions in the UK.
House price growth across UK cities
House price growth in the UK registered 2.4% annual growth in May. This is up from 1.6% at the start of the year.
The strongest house price growth can be seen in Nottingham (4.3%) and Manchester (3.9%), with prices declining in Oxford (-0.6%) and Aberdeen (-2%).
As demand levels rise, the number of homes for sale is also rising. But not at the same pace.
The number of new homes for sale in key UK cities is about 15% lower than this time last year.
Cambridge, Newcastle and Glasgow have between 30% to 40% fewer homes for sale than last year.
This imbalance between increased demand and lack of stock has resulted in an increase in house prices. Average asking prices are up by 7% compared to June 2019.
What’s next for the housing market?
Donnell says: “We see returning pent-up demand and new buyers entering the market creating upward pressure on prices in the face of a lower supply of homes for sale. This has been exacerbated by the lockdown.
“The average asking price for homes marked as sold on Zoopla is 7% higher than a year ago. This is down to an increase in sales in higher value markets where activity has remained subdued in recent years.”
Donnell adds: “We do not expect the rate of growth in the Zoopla House Price Index to reach this level. Rather, it is expected to hold steady at 2% in the coming months.”
The wider economic picture will likely begin to exert downward pressure on prices later in the year. This is because of the impact of coronavirus on employment figures and mortgage deals.
Mortgage payment holidays are an option for those facing financial hardship during this time. There may soon be further government intervention to support the housing market.
Activity in the market remains strong. The opening of the Scottish market at the end of June is expected to further boost sales numbers.
UK house prices are up by 2.4% in May, compared to 1.6% annual growth in January this year.
An imbalance between supply and demand is likely to support pricing in the short term, before the wider economic landscape causes house prices to fall toward the end of the year.