What an interesting market we find ourselves in. Due to lockdown there’s not enough data for accurate statistics on recent activity. What we do know is that the UK property market is stronger than most and often bucks trends.
Focusing on key factors that influence the property market, the following are likely to have a strong impact on volume of sales and prices for the second half of 2020.
Pent up demand
Due to the market slow-down in the lead up to Brexit, there is a 2 year backlog of sellers and buyers who want to get moving. The spring market in 2020 got off to roaring start, with plenty of transactions going through until forcibly stalled by the lockdown which suspended property viewings, surveys and removals.
This pent up demand remains, with the vast majority of sellers staying on the market and those in the middle of a sale holding on for lockdown to end to complete their transaction.
Add to this the new demand from those who want bigger houses/gardens/out of town locations and it’s the perfect storm for a roaring property market.
Favourable mortgage rates and products
The cost of borrowing is at an all time low, with 5 year fixed rates available. There is rarely such a good time to borrow which has driven significant interest from first time buyers – the lifeblood of the property market.
As soon as the lockdown was eased, mortgage companies brought new products to market, with plenty of new 90% loan-to-value mortgages available, and even some at 95%. This shows confidence that prices will hold.
Need for increased living space
The recent lockdown has created a surge of interest in upsizing from families and couples who now realise their living space is just too small for them. This issue has been compounded for those with small gardens or no garden at all.
Implications of working from home long-term
It is expected that working from home will become far more prevalent. Companies have seen they can operate with home based staff save costs on premises at the same time, while many staff value the flexibility. This creates a need for a dedicated home office space.
Couple this with the fact that those working from home will not need to commute as often, it opens up the feasibility of moving further away from office locations. April saw a 20% increase in searches by Londoners for out of town homes. City workers typically want no more than a 1 hour direct commute, based on a daily journey. This journey time becomes more flexible the less often it’s required.
Busy summer market expected
July and August are usually quiet months for property viewings and sales. With the spring market largely put on hold, there’s a backlog of people very keen to move, plus those who have new requirements as a result of lockdown (as above). This year, most people will likely holiday at home rather than abroad or even in the UK, with plenty of time to focus on moving house and taking advantage of low interest rates.
Is demand outstripping supply?
Far fewer homes than usual came to market in April and May, yet demand is high. Buyers hoping to get a bargain may be disappointed as there’s plenty of competition. As always, when you find a property you love, work with the agent to secure it quickly.
Will prices drop?
Taking into account the above, specifically the low cost of borrowing and high loan-to-value mortgages available, increased demand away from London and the 2 year backlog of buyers ready to move, it is generally expected that prices will hold steady. While some buyers are chancing their luck with lower offers on the basis of a future potential dip of, say 2%, sellers are generally holding firm on price, not least due to lack of competition caused by low stock levels.
As buyers venture out of lockdown in increasing numbers, competition from other buyers will increase so if you find the right property, it is advisable to put in a strong offer to secure it.
If you’re thinking of putting your house on the market and looking for a new home, please get in touch with us, we’re here to help.