Eco­nomic re­al­ity yet to hit boom­ing prop­erty mar­ket

The Daily Telegraph - Business - - Technology Intelligen­ce - By Is­abelle Fraser PROP­ERTY EDI­TOR

Con­fined at home but freed from the com­mute, lock­down had a huge im­pact on how mil­lions of fam­i­lies lived. No longer tied to where they work, home­own­ers have re­alised it may be pos­si­ble to have more space and a gar­den. Prop­erty web­sites Right­move and Zoopla re­ported record traf­fic as wannabe buy­ers sought to make that a re­al­ity.

It re­mains to be seen if this rep­re­sents a fun­da­men­tal shift in be­hav­iour, away from cities and to­wards a work-from-home cul­ture.

But for the prop­erty mar­ket, at least in the short term, lock­down and its af­ter­math have had an in­stant ef­fect. As soon as re­stric­tions were loos­ened, es­tate agents re­ported a huge spike in de­mand for homes in the coun­try­side and cities’ outer com­muter belts.

This com­bined with a stamp duty hol­i­day and pent-up de­mand left over from the “Boris bounce” af­ter last year’s elec­tion to cre­ate a mini-boom.

Soar­ing against the odds

To be­gin with, anec­do­tal ev­i­dence sug­gested the surge was be­ing driven by just a few wealthy buy­ers ready to pay far over the ask­ing price for a place in the coun­try. A few months have now passed since mar­ket re­stric­tions were lifted, and it’s clear that changes are far more wide­spread.

Right­move has recorded a 4.6pc surge in ask­ing prices since last Au­gust as ven­dors seek to ben­e­fit from a jump in de­mand. Es­tate agents body NAEA Prop­er­ty­mark said that the num­ber of prop­er­ties sold per branch was at its high­est level for 13 years. Zoopla has said that prop­er­ties are sell­ing 31pc faster than last year.

Part of the rea­son has been the stamp duty hol­i­day, in­tro­duced by Rishi Su­nak, the Chan­cel­lor, to stim­u­late ac­tiv­ity. House prices are ris­ing as a re­sult – even though the coun­try has been through one of the most bru­tal re­ces­sions in its his­tory.

This can partly be ex­plained by an im­bal­ance in the mar­ket, as well as the tax cut. De­mand is up 34pc so far this year com­pared with 2019, but new sup­ply is still 12pc, ac­cord­ing to Zoopla. Since the pan­demic started, price fore­casts have ranged from a fall of 3pc to a drop of 15pc or more. But Zoopla now says it ex­pects prices to rise be­tween 2pc and 3pc in 2020.

Cre­ation of mi­cro mar­kets

Those mov­ing now are tak­ing a gam­ble. Will they still be able to work from their home in the coun­try­side if things go back to the old nor­mal? The spe­cific de­mand driven by lock­down has led to the cre­ation of su­per­pow­ered mi­cro mar­kets, with in­ter­est strong­est in leafy com­muter belt towns in the South East.

Right­move re­ports that the num­ber of listed prop­er­ties has in­creased the most in Har­low and Wick­ford in Essex, and Hert­ford in Hert­ford­shire.

But while de­mand is soar­ing in the coun­try­side, towns, vil­lages and sub­urbs, it is more mod­est in cities.

Ideal­ism meets re­al­ity

The soar­ing de­mand re­ported by Zoopla and Right­move is based on buyer en­quiries and should be treated with some cau­tion. Peo­ple want to move, but can they? Many banks have shut up shop to first-time buy­ers with low de­posits. Re­search pub­lished by an­a­lyst De­faqto showed that there were just 28 deals avail­able to buy­ers with a 5pc or 10pc de­posit. But with record low in­ter­est rates, some lenders are very keen to of­fer mort­gages – as long as you have enough of a de­posit.

This has trig­gered a big im­pact on the type of peo­ple buy­ing. Anal­y­sis by Sav­ills of in­dus­try data from trade body UK Fi­nance sug­gests ex­ist­ing home­own­ers and cash buy­ers are the ones mov­ing, not first-time buy­ers or buy-to-let in­vestors.

The dreams of a post-lock­down es­cape are meet­ing the re­al­ity of the mort­gage mar­ket, and the pan­demic has served to widen the di­vide be­tween the haves and have-nots.

The pain be­gins in au­tumn

Tax­payer-funded fur­lough, mort­gage hol­i­days and a ban on evic­tions have so far masked the loom­ing eco­nomic re­al­ity. But all three are due to be un­wound in the au­tumn. Si­mon Ru­bin­sohn, of the Royal In­sti­tu­tion of Char­tered Sur­vey­ors, says: “The big­ger risk next year ... is rather than big price drops, ac­tiv­ity flat­lines.”

The real pain will be felt by renters and landlords. While the Gov­ern­ment has urged banks to con­tinue sup­port for strug­gling home­own­ers, ten­ants will face evic­tion if they rack up ar­rears and get no help pay­ing rent.

A fun­da­men­tal shift?

The prop­erty mar­ket is de­tached from eco­nomic re­al­ity. The new nor­mal is this sense of un­cer­tainty, an ex­pec­ta­tion prices will fall at some point this year or next, when the re­ces­sion catches up. It also rep­re­sents a new at­ti­tude for many buy­ers, in which the psy­cho­log­i­cal ef­fects of lock­down out­weigh eco­nomic con­cerns. And it serves to en­trench the di­vide be­tween those who can get fi­nance – largely peo­ple with a stake in the mar­ket – and those who can’t.

The Cotswolds and other coun­try­side lo­ca­tions are prov­ing pop­u­lar af­ter lock­down

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