- Property firm, Rightmove, reported that the summer month of July 2020 was its busiest month in a decade with boom in housing market led total sales at approximately £37 billion.
- This was £12 billion more residential property sales as compared to July 2019.
- The average asking price for a home at £319,497 was also registered to be lower than £320,265, recorded in July 2019.
The housing market has seen a change of trends during the summer of 2020 with unexpected rise in activities from buyers and sellers. According to a study conducted by the UK’s leading property website, Rightmove, instead of a normal slow down during the summer season, there is a significant acceleration in the house sales after the government allowed the property market to start functioning in mid-May 2020 by lifting the coronavirus-induced lockdown. Rightmove described July 2020 as its busiest month in the housing market that it has witnessed in more than a decade. The market saw an increased number of properties being listed by the would-be sellers in any month since 2008. It is to be known that usually in the summer season, the sellers try to attract the buyers who remain preoccupied with their holiday travel plans.
Key reasons behind rise in house sales recorded in July 2020
The boost in activities in the property market in July 2020 was fuelled by the government’s announcement of a temporary stamp duty holiday on homes priced up to £500,000 in England and £250,000 in Wales and Scotland in early July 2020. Several industry insiders pointed out that this measure by the government has led to a considerable rise in demand for homes priced between £500,000 and £750,000 since the announcement of the tax break. The statistics from various leading real estate agents according to Rightmove also suggested a similar trend.
Also read: Has Sunak’s Stamp Duty Holiday Led to The Upbeat Demand Scenario for The UK Property Market?
There is a considerable build up in the impetus as the number of weekly sales agreed showed a jump by 60 per cent, compared to the same week a year ago. Although Rightmove takes into account considerable regional variations, its latest data showed that the market recorded a rise of 44 per cent in the total number of properties that came to the market as compared to the same period in 2019.
In addition to a pent-up demand led by the market being shut-down during the lockdown period, a significant change in buyer preference has spiked the additional demand. The change in preference is due to the various experiences they have had with their existing homes while staying inside during the lockdown. Several industry insiders viewed that the home buyers would not prefer to incur travelling expenses for commuting into big cities for work or have a house in urban localities, which are closer to their workplaces. Post lockdown period has seen an increased demand for homes with spacious living spaces and garden areas.
Several industry insiders agreed that they were noticing an increased level of activities across all price brackets. Observing that the buyers would push for sales completion before the stamp duty holiday comes to an end in March 2021. Many of these industry professionals expect this trend to continue into the fourth quarter as well.
As the sellers sought to make the most of the rising demand, the asking prices reached record levels for around seven regions across the UK. The national average monthly drop recorded in the last decade, for this summer holiday season, is of 1.2 per cent. But, not this year.
The mini-boom in the housing market has witnessed a monthly price rise in almost ten out of twelve regions. The latest statistics by Rightmove presented a minor reduction of 0.2 per cent or £768 in the asking price for Britain as a whole. Against this, the national asking price trend has pulled down the prices for properties located in London that recorded an average slip of nearly 2 per cent month-on-month.
What lies ahead for the housing market?
Rightmove in its study brought attention towards the increased pressure on the lenders and transporters which are functioning below their usual capacity, compelled by the social distancing norms led by the government during the coronavirus pandemic. Given the capacity restraints due to the furlough scheme and several people still working from home, some lenders have limited their range of products as it would be difficult for them to process the mortgage applications.
In such a scenario, Rightmove suggested that buyers would require having additional patience and plan in advance to meet the stamp duty deadline of 31 March 2021. The property website said that amid a busy pace of the housing market that is likely to prevail in the short-term, it is advised to be alerted of the wider economic concerns that could unfold in the times to come. Given the number of sales agreed at present time increasing to a ten-year high, there is an increased pressure on the transporters. During the pre-lockdown periods, it took almost three months as an average time between completing a sale and moving.
It is important to note here that in end-July 2020, Nationwide Housing Society, world's largest building society that works in the areas of current account, mortgage, savings and other personal finance, cautioned of a false dawn in the housing market after reporting an upward scaling of price in the same month. It observed that the stamp duty holiday encouraged the buyers to increase their search for homes in July 2020 after months of lockdown. The society’s house price index stated that in July 2020, the values climbed by £4,533 to reach £220,936, reflecting a rapid recovery in housing market activity since the lockdown restrictions were lifted. Nonetheless, it feared that the unanticipated level of activity in the property market would not stay for long, given the winding down of the government’s furlough scheme in October 2020 would potentially lead to a jump in job losses later in 2020.
Also read: Rising UK House Prices Despite Deteriorating Economy; Focus on Taylor Wimpey & Crest Nicholson
Housing market July 2020 trends: Details of the research carried out by Rightmove
In July 2020, Rightmove has recorded its highest monthly sales agreed in the country, since it started keeping records. Sales agreed in July 2020 with a total worth of around £37 billion increased by 38 per cent as compared to the same period in 2019 which reported the total sales at £25 billion. While the figures of the number of sales agreed for large homes ascended by 59 per cent on an annual basis, it climbed 29 per cent for first-time properties. Large and spacious homes having three to four bedrooms, excluding four-bed detached properties saw a steep increase in demand as the agreed sales for them saw an upward movement.
Despite the economic crisis brought in by the coronavirus pandemic, the sales numbers were more by £12 billion in July 2020 as compared to July 2019. In comparison with last year, the average asking price for a home was also registered to be £768 lesser than 2019. The average asking price for a home in July 2020 was recorded to be at £319,497, lower than the £320,265 registered in July 2019. However, in London, prices recorded a downward skid and fell around 2 per cent over the past month. The property firm noted that in the week to 12 August 2020, sales were up by 60 per cent against the same period in 2019.
Describing the present housing market boom as an important change in trend from the usual noticeable aspects during this time of the year, across mainland Britain, the asking prices dropped by an average of 0.2 per cent. In case of properties located at London, the asking price fell 2 per cent. However, in terms of the number of houses that came to the market, London recorded a rise of 69 per cent year-on-year (YOY).
Definitely, the current situation has brought positivity for both the property sector and the wider economy as a whole. The market that showed good performance in the first quarter of 2020 has picked up since the lockdown restrictions were lifted. The research by Rightmove is an indication that there has been a considerable shift in the trends followed by the property market in normal times. The shift witnessed in last couple of months show that the boom in the market arising out of unforeseen demand during lockdown has gathered pace with the progress of the summer season. Given the resilience that the housing market has shown since its reopening, many experts are doubtful of the optimism in the market to prevail for a long-term. The experts agreed on the likelihood of the job losses expected to surge after the furlough scheme comes to an end by October 2020, potentially impacting the mortgage ability of a large section of the buyers. Some experts also pointed out that the buyers who are in a chain-free position would increasingly avail the benefits of the increased activities in the present market scenario.