Entering October we have a Covid “second wave” which is introducing a new “wave” of uncertainty running throughout the housing market once again.
The post-lockdown bounce took many by surprise. It was spurred on by the rush to the countryside, a desired move out of the cities as office workers retreated to their homes. Weather this will be lasting is yet to be seen, but it resulted in online enquiries for moves out of the cities reaching record property portal “hits”.
During August / September, the Nationwide and the Halifax house-price inflation indices reached their highest level since 2016. The Halifax put house-price inflation at over 7% and industry statistics showed that mortgage approvals over the summer of 2020 were at their highest level since 2007.
And the Rishi Sunak stamp duty holiday certainly seems to have done the trick: the average asking price of a home has soared to a record £323,530 as sellers capitalise on unprecedented demand during this concession.
Despite many predictions that this mini revival would be short lived, and that the market would be in decline again before Christmas, which could still happened, there is no sign as yet that the increased second wave uncertainty has killed off the bounce.
The latest Royal Institution of Chartered Surveyors (RICS) housing market survey showed that a substantial majority of its members were still positive, expecting sales to continue to rise over the next quarter, though these opinions were perhaps taken before the full effects of a second wave became apparent – many in this period thought the worse of Covid was over. No such luck!
Looking further out into next year, and for the next 12 months, most industry watchers can’t see any sort of property boom continuing, especially in the face of what could be the biggest rise in unemployment in generations, and most likely to be followed by steep tax rises.
Rishi Sunak, generous as his support packages have been to-date, must have a limited arsenal of financial and fiscal measures up his sleeve, as the country’s debts continue to build-up. Despite interest and mortgage rates being at record low levels, people’s natural caution will eventually kick in and this urge to move and to buy houses will be brought into check.
Property prices are all about supply and demand; a delicate balance which can shift very quickly when activity levels cease, and this balance can play out differently across the regions. For example, while a relative oversupply has put prices under pressure in inner London and regions such as the South West, in other regions prices have held up well, with little in the way of more houses coming onto the market.
The Rental Market
Meanwhile, with the UK private rented sector now accounting for over 4.5 million households, and doubling in size since 2002, affordability constraints for a leap into ownership mean that there is likely to be no let up in demand for renting in the foreseeable future.
Indeed, according to a recent report produced by Knigh Frank, the is likely to be 10% cumulative UK growth in renting between 2020 and 2024
While the Covid effect might see a shift in the popularity of some areas for renting, and those areas where rental demand remains strongest, for example through city to suburb / countryside migration, at least in the short-term, nevertheless, rental demand is likely to remain strong.
As we enter an uncertain winter and into 2021, its likely to be the rental market that provides us with more certainty than the sales market.