Sales agreed on £62bn* more homes in 2020 than 2019 as southern England market rebounds most strongly

21st December 2020

Search for space means rate of price inflation for houses is twice that of flats**

 

  • Rollercoaster year set to end with demand up 33% compared to December 2019***, when the election hampered market activity, creating upward pressure on house prices, now running at three year high of 3.9%****

  • Pandemic has driven a seismic search for space and quality of location, with 40% more buyers across the whole of 2020 compared to 2019 - despite 2+ month closure of UK housing market

  • More activity at higher price points means the value of homes selling is 26% higher than in 2019, with the value of sales agreed in 2020 up £62bn on the previous year

  • Fastest growth in the price of all housing at a city level are being recorded in Manchester (5.7%) followed by Leeds, Nottingham and Liverpool all at >5%

  • Highest rates of price inflation are in regional housing markets, but greatest increase in market activity has been concentrated in London, the South East and Eastern England

  • Restrictions on movement, more households staying in the UK, and less travel to relatives means interest in housing is expected to be stronger than in previous years  

Monday 21st December 2020, London: Housing market activity has come full circle in 2020 and will end on a high, despite the two month+ UK market closure borne of the pandemic. These are the latest findings by Zoopla, the UK’s leading property portal, in its monthly House Price Index.

Record demand for housing in 2020

Market conditions continue to defy the traditional festive lull with demand in the last four weeks up 33% on the same period in 2019, when the market was preoccupied with the General Election.

Across the whole of 2020, we have recorded 40% more demand for housing than in 2019, despite all activity ceasing during the 2+ month housing market closure. Fuelled by a seismic search for space and desirability of location, the pandemic and its subsequent lockdowns have unlocked latent demand for housing with even more focus on the size and quality of homes, and stimulating more decisions to move.

Demand is proving committed rather than speculative, and is converting readily into sales agreed. 2020 has recorded 9% more sales agreed than 2019, although with transactions taking three to four months to complete, a proportion will spill over into 2021.

While demand is up 40% over 2020, the flow of new supply has increased by just 4%, creating a supply and demand imbalance, and enacting an upward pressure on house prices.

The rebound in sales has been strongest in the South East and Eastern England, where they are more than 20% higher than in 2019.

 

Figure 1

 

Source: Zoopla House Price Index

 

Value of homes selling up 26%

The COVID crisis has driven a shift in the demographic profile of home movers, with a notable increase in more affluent demographics, where house prices are typically higher.

More sales agreed at a higher price point means the monetary value of homes selling is 26% higher in 2020 than in 2019. This equates to an additional £62bn of sales, which will take the annual total of homes sold this year to over £300bn.

The value of mortgage approvals for home purchases in October was up 68% on the previous year – resulting from sales agreed two to three months prior, at the peak of the rebound.

A clear correlation has emerged between the volume and value of sales agreed across regions and countries. Higher average selling prices in the East of England and the South East have increased the value of homes sold in 2020 by 37% compared to 2019.

Houses versus flats

The fundamental search for more space that has characterised the pandemic fuelled market has resulted in the average rate of growth for houses running at double the rate of growth for flats.

As households re-evaluate their housing needs, demand for family houses with gardens, parking and extra space to work from home has intensified.

Demand for flats with private outdoor space is also high, but many don’t meet this requirement, which is being reflected in pricing levels and increased time to sell.

Figure 2

Source: Zoopla House Price Index

 

Supply / demand imbalance drives house price growth

Rising demand with no major expansion in supply has resulted in upward pressure on house prices in 2020. UK house price inflation reached a three year high of 3.9% in November, up from 1.3% a year ago. This three-month growth rate peaked at 2% in September and has since slowed, indicating that annual growth will plateau at approximately 5%.

The impetus for house price growth is coming from the northern regions and Wales, where affordability remains less of a barrier to house price growth. Average prices in the North West are increasing at 5% followed by Wales and Yorkshire and the Humber, both running at 4.9%. At a city level, Manchester is registering growth of 5.7% followed by Leeds, Nottingham and Liverpool, all recording growth over 5%.

A strong start to 2021

As we approach the end of the year, we can see that the market has come full circle, with housing market activity remaining well above the typical levels for this time of year.

The once in a lifetime reassessment of housing has further to run as households look to the future and reflect on their housing priorities, particularly in light of the seemingly ongoing restrictions.

The stamp duty holiday has contributed to ongoing demand, but in our view this is secondary to the intrinsic appetite for more and better quality living space compounded by the global pandemic.

End of year market momentum is expected to support a seasonally strong start to 2021, with more mature, equity rich, long-time homeowners continuing to take a growing share of sales. Improved availability of higher loan-to-value mortgages for those with deposits of 10% or more are already increasing, which will support first-time buyers over the next 12 months.

With a long Christmas weekend and many households isolating in smaller groups, we expect interest in housing to be stronger than usual ahead of the traditional Boxing Day bounce, when interest spikes and the next tranche of households start planning their next move.

Richard Donnell, Director of Research & Insight, Zoopla, comments: “The housing market is ending 2020 strongly with more buyers looking for a home than this time last year. More sales at higher prices have boosted the value of homes selling in 2020, led by a strong rebound in southern England.

“The ‘once in a lifetime re-assessment of housing’ kick-started by the pandemic has further to run in our view and this will support demand into 2021. With a long Christmas weekend, and many households isolating in smaller groups, we expect interest in housing to be stronger than usual ahead of the traditional Boxing Day bounce when interest in housing jumps and the next tranche of would-be buyers.

“While market activity is being boosted by latent demand unlocked by the pandemic, the housing market is not immune to economic forces and rising unemployment. Economic pressures are already impacting in parts of the market, reducing the volume and share of sales in less wealthy areas, for example.  

“Looking ahead to 2021 we expect house price growth to reach 5% by mid Q1 and then slow to +1% by the end of the year as demand starts to weaken over 2021 H2. The number of completed housing transactions will be buoyed by a strong Q1 with sales agreed over 2020 Q4 completing early next year. Overall, we expect the number of completed housing transactions to match 2020 levels at 1.1m.”

 

 

- Ends -

For further information, please contact PR Team on pr@zoopla.co.uk or +44 (0)20 3873 8770.

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