UK real estate is a c£1,600bn market that contributes over £100bn to UK GDP (per BPF).
It’s a huge market (see the listed players here), and it’s also a part of the economy that has bounced back surprisingly well from the lockdown.
In fact, Zoopla research finds that a major decline in house prices is 'unlikely' this year despite the recession. It finds that:
- Property prices are holding firm and are still up 2.5%year-on-year, with 'little sign of slowing',
- Demand from buyers is 34% higher than a year ago,
- Activity is now running at its strongest pace for over five years, with the number of newly agreed sales in August up 76 per cent against the five year average, and
- The time it takes to sell a home has shrunk from 39 days to 27 days since lockdown, compared to the same period a year ago.
Zoopla comments:
This is not just pent-up demand returning to the market. It also reflects the impact of a once in a lifetime reassessment of the nation’s housing needs in the wake of the 50+ day lockdown… Housing market conditions remain unseasonably strong despite the UK moving into recession. While the economy has contracted sharply and unemployment is rising, consumer spending has rebounded and purchasing manager indices are pointing to a wider rebound in the economy.
Can this last? It seems completely counter to other parts of the economy. House prices typically fall during a recession, usually after a period of strong growth.
Pent-up demand, the stamp duty holiday, and furlough extension have all boosted the market in the short term.
But as we head into winter we could see rising unemployment as government support measures are withdrawn, increasing COVID cases as lockdown is withdrawn, and ongoing uncertainty over Brexit. Any and all of these could weigh on sentiment depending on how it all plays out.
In all, I’m wary of this rapid, post-lockdown bounceback in prices - but it’s certainly better than a crash.
Meanwhile a recent Savill’s report confirms these ‘remarkably high levels of activity’ and the ONS notes that rents in the UK increased by an average of 1.5% in the year to June.
Source: Zoopla June Index 2020
The RICS survey is something of a leading indicator for other indexes. It shows high activity levels for July, with a record 87%…
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