Residential Market Outlook Week Beginning 15 June 2020
Buyers and sellers will have to carefully navigate the economic data this summer, says Tom Bill
2 minutes to read
The mismatch between historic and real-time data is going to test property markets over coming months.
Last week brought the biggest decline in UK GDP on record and you could easily be forgiven for thinking that everything is headed south at the moment. Sentiment exerts a big influence on residential markets and August will confirm the arrival of the recession we have all been expecting.
However, currency markets shrugged off last week’s GDP figures as priced in and one economic commentator recently equated such historical numbers to cave paintings given how fast things are changing.
Meanwhile, the real-time data shows traction is returning to property markets.
The first week of June saw the highest number of offers accepted on record for markets outside of London. In the same week, in the lettings market, the highest ever number of valuation appraisals took place.
In the capital, the number of new prospective buyers was 34% above the five-year average and the third highest weekly figure this year.
Prices are also getting firmer. The average discount to the asking price for sales outside London has been 2.6% since the market re-opened on 13 May. That compared to 4% during the lockdown. In London, the average discount is wider but has narrowed to 3.9% from 6.4% during lockdown. The direction of travel is arguably more important than the numbers themselves.
Of course, we are still in the honeymoon period and a market that was dormant for eight weeks has woken up with a spring in its step.
As we head into the summer, one of the keys to understanding what happens next is how consumer sentiment is affected by the flow of economic news. How much will buyers and sellers be able to look through data that is weeks and months old in a fast-changing environment?
It's not inconceivable that August brings both a recession and some positive news on a vaccine or treatment. How would buyers and sellers react to those two conflicting signals?
All of this overlaps with the key question of unemployment and how the furlough scheme is unwound, which will be central to the fortunes of the property market.
We will only be able to start understanding what has taken place towards the end of the year.
However, in trying to anticipate what Covid-19 might mean for property markets, you need to look back further than a few months. Pent-up demand among buyers is best measured in years not weeks.
Brexit and tax policy have held back sales (and prices) for more than half a decade and we saw similar records start to fall this January due to the post-election bounce.
How resilient will that demand remain as the new economic landscape takes shape?
Nobody knows, but the property market was itching to get back into full swing when the Coronavirus came along.