English property market rebounds on pent-up demand

10 June 2020, The Financial Times

Surge above pre-coronavirus levels likely to be shortlived as economic impact bites

A release of demand for property in England, suppressed by the lockdown, pushed the number of sales agreed in early June above pre-coronavirus levels.  Buyers returned to a market effectively shut from March 27 until May 12, data from the property portal Zoopla, estate agent Savills, and property data company TwentyCi show. The rebound in sales was quicker than most analysts expected. But the surge in transactions — which in some segments of the market have doubled in the past week — is likely to be temporary because much of the demand came from buyers who had been forced to pause moves. TwentyCi recorded 22,893 agreed sales in the first week of June, 6 per cent more than in the same period in 2019, and 54 per cent up on the last week of May.  According to Zoopla, sales agreed in the first week of June were 12.6 per cent higher than in the week leading up to the UK’s lockdown. “This is the first real sign that online viewing and new applicant levels is translating into market activity, though clearly to a degree it also reflects pent up levels in demand that was held back during lockdown,” said Lucian Cook, director of residential research at Savills.  Richard Donnell, research director at Zoopla, said: “This spike in demand will be shortlived as the economic impacts of Covid-19 start to feed through into market sentiment and levels of market activity in [the second half] of 2020.” 

However, added Mr Donnell, the increase in sales was partly also new buyers looking to trade up or move out of London. The recovery of sales in the English regions was far ahead of that in London, according to Zoopla, the hardest evidence yet that buyers were looking to move outside the capital. Wealthier buyers have driven the increase in activity. The 3,028 sales agreed on homes valued at £500,000 or more in the first week of June is 17 per cent more than the number agreed in the same week a year ago. Sales of homes valued under £200,000 — a much larger segment of the market — are down compared to 2019, according to TwentyCi.  “Undoubtedly there is some polarisation in the market,” said Mr Cook. “[Buyers were] those with a stronger financial cushion on which to rely and more affluent households less reliant on lending.” That matches patterns seen after previous economic crises, including the 2008 financial crisis, when affluent buyers returned first and took advantage of discounts.  The average reduction from asking price to agreed sale price is currently around 5 per cent on transactions recorded by Savills, compared to 2 per cent pre-lockdown. Agents reported that properties were selling at discounts of 5-10 per cent, or not selling at all.  Camilla Dell, founder of London-focused buying agency Black Brick, said: “There is quite a big gap at the moment between buyers, who feel the world is not what it was, and sellers, who think they’ll just hang on.”

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