"The ‘once in a lifetime re-assessment of housing’ kick-started by the pandemic has further to run in our view and this will support demand into 2021."
Zoopla believes the spike in sales agreed in 2020 is being created by a change in lifestyle aspirations driven by the Covid-19 pandemic along with, but to a lesser extent, the SDLT holiday.
Market conditions are continuing to defy the traditional festive lull with demand in the last four weeks up 33% on the same period in 2019.
Across the whole of 2020, Zoopla has recorded 40% more demand for housing than in 2019, despite all activity ceasing during the 2+ month housing market closure.
Zoopla says this demand is "proving committed rather than speculative", and is converting readily into sales agreed. 2020 has recorded 9% more sales agreed than 2019, although with transactions taking three to four months to complete, a proportion will spill over into 2021.
The rebound in sales has been strongest in the South East and Eastern England, where they are more than 20% higher than in 2019.
While demand is up 40% over 2020, the flow of new supply has increased by just 4%, creating a supply and demand imbalance, and enacting an upward pressure on house prices.
UK house price inflation reached a three year high of 3.9% in November, up from 1.3% a year ago. This three-month growth rate peaked at 2% in September and has since slowed, indicating that annual growth will plateau at approximately 5%.
The impetus for house price growth is coming from the northern regions and Wales, where affordability remains less of a barrier to house price growth. Average prices in the North West are increasing at 5% followed by Wales and Yorkshire and the Humber, both running at 4.9%. At a city level, Manchester is registering growth of 5.7% followed by Leeds, Nottingham and Liverpool, all recording growth over 5%.
Richard Donnell, director of research and insight at Zoopla, commented: “The housing market is ending 2020 strongly with more buyers looking for a home than this time last year. More sales at higher prices have boosted the value of homes selling in 2020, led by a strong rebound in southern England.
“The ‘once in a lifetime re-assessment of housing’ kick-started by the pandemic has further to run in our view and this will support demand into 2021. With a long Christmas weekend, and many households isolating in smaller groups, we expect interest in housing to be stronger than usual ahead of the traditional Boxing Day bounce when interest in housing jumps and the next tranche of would-be buyers.
“While market activity is being boosted by latent demand unlocked by the pandemic, the housing market is not immune to economic forces and rising unemployment. Economic pressures are already impacting in parts of the market, reducing the volume and share of sales in less wealthy areas, for example.
“Looking ahead to 2021 we expect house price growth to reach 5% by mid Q1 and then slow to +1% by the end of the year as demand starts to weaken over 2021 H2. The number of completed housing transactions will be buoyed by a strong Q1 with sales agreed over 2020 Q4 completing early next year. Overall, we expect the number of completed housing transactions to match 2020 levels at 1.1m.”
