SUMMARY

Estate agents in England have now been open for a month. While some data sets show a significant release of pent-up demand, we expect this spike to be short lived.

Data from Zoopla shows that recent demand for housing (as of the first week of June) had risen to 54% above its levels in early March, prior to the lockdown. The number of sales agreed, while lagging behind demand, have largely returned to last year’s levels. 

The RICS survey for May is slightly less up to date, but shows that 48% of surveyors saw rising numbers of new buyer enquiries, and 40% saw rising levels of new instructions. While an improvement on the previous month, it paints a picture of general stability of activity, rather than mirroring the spike we saw in the Zoopla data. 

More robust records of activity, mortgage approvals and registered transactions, are only available up to end April. Mortgage approvals were at their lowest number since monthly records began in 1993, and half the number of the previous low point in the GFC. Transactions were also at historic lows in April, with only 38,000 recorded. Many of these would already have been underway prior to the lockdown. 

While the figures for April were certainly dismal, Oxford Economics believes that the 20% fall in GDP in April marked the bottom of the downturn, and that the economy has seen a gradual recovery since then. We have also been looking forward, and have produced a new set of forecasts, outlining our views on the mainstream market recovery. The current release of demand may trigger a rise in transactions over the summer, but uncertainty around values and employment will add to lender caution. We have also updated our regional house price forecasts. We expect national falls of -7.5% in 2020, and 15.1% growth over the next 5 yrs. The tables are available at the bottom of this report, and the full report here.

Recovery in the housing market will be determined by the state of the wider economy and consumer finances. Interest  rates are expected to remain lower for longer which will support mortgage affordability. This will be welcomed by households most impacted by the economic effects of the lockdown and its aftermath. Record levels of credit repayment suggest that others have benefitted from lockdown, though consumer confidence will take time to recover as it still sits at a historic low.

Nationwide made headlines earlier in the month with reports of values falling by -1.7% in May, albeit based on a smaller than usual sample. Price growth had been increasing in the run up to the Covid crisis, though it remained modest when compared to the 5 year average.

Annual rental growth rose slightly to 1.5% in April. It was greatest in the South West at 2.6%, followed by the East Midlands at 2.4%. Growth was weakest in Scotland, at 0.7%.