Months spent unable to leave the home has done nothing to dent demand among buyers.
On the face of it, a global pandemic doesn’t appear to have done much to dent the UK housing market.
According to the latest house price index from Nationwide, our homes have never been worth more.
August saw house prices rise 2%, taking them to a new record average of £224,123, while annual growth now stands at 3.7%.
Meanwhile those working in the property market report they have rarely been so busy.
Sam Mitchell, CEO of online estate agent Strike, said he had “never seen a market like it” with a 50% increase in demand from buyers compared to pre-lockdown, with the number of agreed sales per week doubling since then.
In his words, it’s now a “seller’s paradise”.
So what’s going on? And is it sustainable?
Off on holiday
The fact that purchasing a property, whether as an owner occupier or as an investor, is now going to come with a much lighter tax bill is obviously going to spur demand.
But speak to those in the industry and they will tell you that demand was already looking pretty rosey even before the holiday was unveiled.
Indeed, from the moment the housing market opened up again post-lockdown, activity has been strong.
The reality is that months spent confined to our homes hasn’t exactly dented our desire to purchase a new property.
There were those who were already keen to move, but who had to pause their home hunt as the nation locked down back in March.
Chances are they still want to move and are now back running the rule over Rightmove.
But then there are also those who were forced to reconsider what they actually want from their home during lockdown, and who may have realised that their current property doesn’t quite cut it. And so they too are now out home hunting.
We’ve long had an issue with housing supply in the UK, with house prices pushed upwards by the fact that we aren’t building enough to meet the existing demand.
That supply problem hasn’t suddenly gone away thanks to Covid-19 ‒ if anything it will have got worse as construction slowed ‒ while levels of demand appear to be booming.
Little wonder then that house prices are on the rise yet again.
Money to burn
It’s also worth reflecting on the fact that, for all of the uncertainty generated by Covid-19, lockdown has given plenty of people a financial boost.
The lack of a commute, the inability to pop to Pret for a coffee and a sarnie every lunch time, the fact that leisure activities have been increasingly impossible ‒ the money that we normally spend on things like that may now instead be sitting comfortably in our bank accounts.
And as a result some buyers now have healthier deposits, and are in a position to make bigger bids for properties.
Bye bye city life
Lockdown hasn’t just made us hungry for a new home though ‒ it’s made plenty of homebuyers consider precisely what they want from a new property, and where they want it to be.
Why pay a premium to live in a city centre, when you can get a bigger home for less in a rural area?
Especially if you spend more of your time working from home than was previously the case?
According to data from the Hamptons estate agent, over the last four months average homes sold in the countryside went for 97.9% of their asking prices.
That’s the highest share in three years. What’s more, around 16% went for above their asking price.
Dipping their toe in
What’s particularly interesting about the apparent rude health of the housing market is just how nervy lenders are about it.
According to the latest data from mortgage technology firm Mortgage Brain, product numbers have dropped slightly for five weeks in a row, stabilising at around 8,500.
That sounds like a lot of course, but consider that it’s down by around 40% on the average seen in the run-up to lockdown, and it’s clear that there’s far less choice when it comes to products.
This has particularly affected those buyers with only a modest deposit, or if you’re looking to purchase a first home.
House prices may be rising but it’s evident that lenders aren’t convinced it will last, nor that there isn’t some economic pain on the way, which is why they are focusing the lending they do on borrowers with more of a proven track record, or who already have a history of home ownership.
Those economic difficulties will apply the brakes somewhat to house price growth, but only time will tell if it’s enough to actually force prices downwards.