Return of buyer demand props up house prices but expect financial hit from Covid to see property market decline by year-end, Zoopla says
- UK house prices expected to rise by 2% to 3% over the next quarter, Zoopla said
- But they will fall towards the end of 2020 and into early 2021
- Sales agreed have returned to pre-Covid levels since English market reopened
A surge in demand for homes since the English market reopened in mid-May and lower supply is expected to prop up prices over the summer, with falls expected at the end of the year when the economic impacts of Covid hit home.
Property website Zoopla said sales agreed over the past four weeks have bounced back to just above pre-Covid levels, with the bulk of the rise in northern cities, and that is going to keep prices rising between 2 to 3 per cent over the next quarter.
Values will start falling more towards the end of 2020 and into 2021 when demand is set to weaken in response to a likely rise in unemployment – as the furlough scheme comes to an end – and as a result of fewer mortgages available for people with smaller deposits.
Sales agreed over the past four weeks have bounced back to just above pre-Covid levels
In 2019, a fifth of all homebuyers purchased a home with a deposit of 10 per cent or less, so a decrease in the availability of high loan-to-value mortgages ‘could preclude this cohort of would-be buyers from entering the market, effectively reducing demand’, Zoopla said.
But for now, a resurgence in demand is going to prop up prices, according to the property website.
‘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 which has been exacerbated by the lockdown,’ said Richard Donnell, director of Research & Insight at Zoopla.
‘House price growth is set to hold up in the near term and we expect the downward pressure on prices to come in the final months of the year as demand weakens.’
Recently upmarket estate agent Savills, which recently said it expected UK house prices to fall by about 7.5 per cent this year across the UK, with property values recovering in 2021, at different rates of growth.
Zoopla said new sales agreed, subject to contract, have grown the most in England, where the market reopened for business since 13 May.
The rebound in sales has been strongest in northern England, led by Leeds, Sheffield and Manchester, where sales are up to 20 per cent higher than in February 2020.
But in Glasgow, Newcastle and Cambridge sales are still below pre-coronavirus levels, which Zoopla says it is down to a ‘significantly’ lower supply of homes for sale.
Stock levels in Cambridge, for example, are up to 40 per cent lower than last year, as sellers did not put their homes for sale during the lockdown period.
The rebound in sales has been strongest in northern England, led by Leeds, Sheffield and Manchester
Zoopla said UK house prices rose 2.4 per cent to an average £217,500 in May compared to last year, although that value is mostly based on sales agreed before the lockdown.
Provisional stats from the HMRC published yesterday have showed that house sales in May were still half of what they were a year ago, despite having risen 16 per cent compared to the previous month as the housing market reopened.
Anthony Codling, chief executive of online property platform Twindig, said most house price data was pointless at the moment as there are not enough transactions to base them upon.
‘The proof point for house prices is the level of housing transactions, without a firm foundation of housing transactions house prices are as secure as houses built on sand,’ he said.
He added that the best decision remained that of the Land Registry, which suspended its house price index until further notice.