Residential Market Outlook: Week Beginning 3 August 2020
Buyers have been surprised by the stiffness of the competition in recent weeks, says Tom Bill
2 minutes to read
Lockdown bargain-hunters may be disappointed by what’s happening in UK property markets.
Discounts are still being negotiated due to Covid-19, but sellers are hardening their resolve as demand grows more quickly than supply.
The number of new prospective buyers registering was 94% higher than the five-year average in the week ending 25 July. The equivalent increase in supply was 54%.
The same imbalance can be found inside and outside of the capital, showing that the competition is not just intensifying among buyers looking for more outdoor space.
What’s happening is the release of pent-up demand that has been building for years against the backdrop of Brexit, tax changes and tighter lending rules.
What does it mean for prices?
Inevitably, as the chart below shows, it means upwards pressure.
In fact, prices are firmer than they were a year ago, based on the level of offers made and accepted.
On average, offers were accepted at 98% of the asking price in July, which is a percentage point higher than the same month last year.
Similarly, offers made have gone from 94% to 95% over the last 12 months. Indeed, there have been numerous instances where agreed prices have exceeded the asking price in recent weeks.
Of course, a lot has happened over the last year. Most notably the dip and subsequent bounce either side of the general election in December. As well as the predictable drop during the market lockdown in April and May.
However, this doesn’t have the over-exuberant feel of a price bubble. With a global pandemic still underway, buyers are not getting carried away.
It does, however, feel like a slightly artificial moment in time. Covid-19 has been a great accelerator for existing forces and patterns of behaviour across all areas of the economy and the housing market is no different.
For those not watching the market closely in recent years, the scale of pent-up demand has probably come as a surprise. Anecdotally, some buyers have certainly been taken aback by the stiffness of the competition in recent weeks.
I would expect the market to eventually self-correct as there is probably only so far prices can climb against the backdrop of a global pandemic.
What should simultaneously begin to emerge is what the new longer-term normal looks like. The property market will be no different from many other sectors of the economy in that respect. It will ultimately depend on issues outside of its control including vaccine development and the government furlough scheme.
For now, prices are heading in one direction.