Hometrack Cities Index March 2020

Another solid piece from Zoopla/Hometrack, looking at the state of play in the housing market. Their research suggests a huge decline in transactions in April, but with some pick up in demand towards the end of the month.

Headlines

• UK city house price growth +1.8%, with March recording lowest monthly growth for a year (<0.1%).
• Demand for housing fell by 70% from early March. The decline bottomed out in early April and has been increasing steadily over the last 3 weeks. Demand remains 60% lower than in early March.
• We estimate that there are 373,000 sales held up by the lockdown for homes worth £82bn. We expect completed housing sales to be 50% lower in 2020 compared to 2019.

UK city house price inflation +1.8% y-o-y

Annual house price growth is +1.8%. This low by recent standards but higher than a year ago +1.2% (Fig 1). The lockdown is yet to impact house prices – and the scale of any impact remains to be seen. The monthly growth rate for March, at 0.1%, is the lowest for a year, and a third the level of January and February.

New sales agreed are down 90% since early March and with the lockdown set to last until at least early May, pricing evidence will be limited over the next 2-3 months. Some new sales are being agreed based on viewings ahead of the lockdown but running at a tenth of the levels in early March. Activity will take time to recover as restrictions lift and market activity grows.

Click image for larger scale

Click image for larger scale

Fall in demand bottoms out and starts to rise slowly

The browsing of property online and the demand forhomes fell sharply over March with the greatest decline before the lockdown (Fig. 2). The fall in demand and browsing bottomed out at the start of April and has started to increase slowly off a low base. Browsing levels have recovered to within 35% of the levels at the start of March while demand is still 60% lower.

Bounce back in northern cities

Cities in northern England have recorded below average falls in demand over the recent downturn. In addition, they have recorded some of the stronger increases in demand over recent weeks, notably Manchester, Liverpool and Leeds. These are all cities where 2020 started strongly and housing affordability remains attractive. These cities could see a faster
bounce-back when restrictions lift although most cities have recorded an improvement in recent weeks.

At the other end of the spectrum, higher value and high growth cities such as Cambridge, Edinburgh and Southampton have recorded no material change to underlying levels of demand over the last two weeks.

A 50% drop in housing sales projected for 2020

Our current estimate is that we will see a 50% drop in completed housing sales in 2020 compared to 2019. The historic low for housing sales in a single month was 42,000 in January 2008. We expect sales volumes to remain below this level until September 2020. This will result in transaction completed being 50% lower than last year.

The positive news is that the total amount of housing for sale is just 4% lower than the start of March as vendors maintain listings so there is no mass withdrawal of homes for, so there is still plenty of choice for those looking.

Outlook for demand remains uncertain

While demand for housing has started to increase, there is a question mark over the speed and trajectory of a recovery towards normal levels in the months ahead. Recent survey data from IPSOS Mori shows the over-riding concern of consumers is the COVID-19 crisis. Economic concerns are a distant number two and fears over employment down in eighth, although rising. Low mortgage rates and major Government support are a positive but demand for housing in the coming months may be more seriously challenged by a deteriorating economic outlook that directly impacts employment levels for homeowners.

The impact on house prices in 2020

We will have a clearer view on the price impact once restrictions start to lift and we get a flow of new sales agreed and pricing evidence. We will be able to track this and changes in the level of pricing for new and existing sales inventory to get an early view on the development of pricing.

​All content from Zoopla/Hometrack - original article may be found here