Factors currently influencing market activity

What’s happening?

The number of new sales agreed in the UK has surged 28% above pre-lockdown levels, according to our latest monthly House Price Index Report.

And in another sign of housing market buoyancy, in Scotland and Wales, where housing markets were shut longer than in England, weekly sales volumes are nearly 50% higher on pre-COVID-19 levels.

Momentum is helping to support property values, with the annual rate of growth edging up to 2.7% in June.

The factors influencing market activity

Supply and demand imbalance

Lockdown has heavily influenced supply and demand dynamics in the housing market.

The housing shutdown, which saw the closure of estate agents, cut the flow of homes coming to the market and agreed sales by an enormous 90%.

Although they are now recovering to pre-lockdown levels, the increase in supply and sales in the first half of the year are 20% down on the same time spell in 2019.

But a post-lockdown bounce as well as the strong start to the year have meant that since 1 January, buyer demand is flourishing.

Demand running higher year-on-year

In fact, demand is running 25% higher than the first six months of 2019. And over the last month alone, it has been double that of the same time period last year.

The bulk of demand is thought to have been pent-up, with buyers who were forced to put their moves on hold in March now able to progress.

Returning buyers

Returning buyers are thought to account for 80% of levels that would have otherwise been anticipated. It is also possible that lockdown has prompted some people to re-evaluate their lifestyle and seek a house move.

This bounce in buyer appetite has been stronger in cities across northern England. Top of the list for demand are Sheffield, Liverpool, Manchester and Nottingham, which are also the top cities for house price growth.

Stamp duty holiday

The Chancellor’s stamp duty holiday, which could see buyers save up to £15,000 if they are purchasing a property of £500,000 or more, has also had an immediate knock-on effect. There has been a 27% spike in sales agreed in London in the first two weeks alone.

However, this has not been matched in other areas where lower average house prices are less sensitive to the new rules

The tax cut is expected to continue to boost demand in particular in more expensive housing markets across southern England.

What’s next?

Extended support on the horizon?

There are reports that the government is drawing up plans to continue Help to Buy beyond its current December deadline in a bid to support buyers whose plans have been delayed by the lockdown.

The scheme offers buyers in England who have a 5% deposit, a government loan of up to 20% of the property value, or up to 40% in London, that is interest-free for the first five years.

The outlook for demand and sales volumes

Richard Donnell, Research and Insight Director, Zoopla, said: “The staggered reopening of housing markets across countries and the added impetus from the stamp duty holiday mean we expect buyer demand and new sales volumes to hold at current levels over the next two months.

“The net result will be continued support for house price growth at current levels over the second half of the year.

“Regional cities in northern England and the Midlands have the strongest underlying trends.”

Find out more about the market outlook in the latest House Price Index Report