Property The year that shook the housing market

What happens next depends on vaccines and the economy, Melissa Lawford writes

The last 12 months were the most bonkers the British property market has ever seen. One year ago this week, the market was shut down for the first time in history, suspending around 450,000 home moves. Buyers, sellers, and estate agents panicked. Analysts forecast price falls larger than those recorded during the financial crisis.

But a surprise reopening of the English housing market in May almost immediately brought booming sales. Lockdown meant homes had become more important than ever before. Prices rocketed to record highs, stoked by the stamp duty holiday brought in later. Government support protected the property market from the worst recession in 300 years, indicating it would do anything to stop price falls.

Yet the reasons why the pandemic has boosted sales will change as the rollout of the vaccine gathers pace and the economy recovers. So what can the last 365 days tell us about the future of house prices?

A SNAP CHANGE Guy Gittins, of Chestertons estate agents, said: “The first week of lockdown was absolute crisis mode, it was a freefall of fear. As a business we were looking at how long we could survive if we had no further sales revenue for the year.” For a short period in central London a few panicked sellers began offloading multi-million pound properties at 25pc discounts. Transactions plunged.

But in the third week of lockdown buyer registrations bounced, jumping 100pc above the pre-lockdown period, said Mr Gittins. “Lockdown quickly forced people to prioritise moving home, placing a new value on outdoor space and additional bedrooms for working from home,” he said. “It was an aggressive change.”

When the English housing market reopened in May, agents were inundated with enquiries. “The market fell off a cliff and then it picked straight back up again,” he added. In December, annual house price growth hit 7.3pc, according to Nationwide Building Society – the fastest rate since November 2014.

CAN THE GROWTH CONTINUE? The winter lockdown and the anticipated end of the stamp duty holiday in March meant that in December buyer demand plunged 78 percentage points below the peak recorded in July, according to property website Zoopla’s measure of searches and inquiries.

But the success of the vaccine rollout and the Government’s roadmap out of lockdown is massively boosting consumer confidence. In February, buyer demand was in line with the level recorded in September – 15 percentage points above January 2020.

This was before the extensions of the tax break and the furlough scheme were announced in the March Budget, alongside the introduction of government-backed 5pc deposit mortgages in April. Such rising demand means that agreed sales are likely to increase.

SUPPLY AND DEMAND This growth will be underpinned by a shortage of properties for sale, said Andrew Wishart, of consultancy Capital Economics. In February, sales outpaced supply at the fastest rate in 14 years, according to the Royal Institution of Chartered Surveyors, a trade body. The last time it hit the current level, house price growth was sustained at above 9pc for 12 consecutive months.

CHANGING BUYER PRIORITIES Demand for houses in rural locations has led the post-lockdown boom. House prices in the South West jumped 17pc last year, according to Halifax bank. This has been driven largely by London relocators seeking more space in an age of remote working.

A survey of estate agency Savills’ buyers found that half of respondents say that having a garden has become more important since the pandemic. Only 39pc of London buyers ranked proximity to a Tube station in their top two priorities, compared to 63pc a year ago.

COULD THE LOCKDOWN EFFECT BE REVERSED? Lawrence Bowles, of Savills, said: “It is a pet theory of mine. I think people will move back. Many people have not thought about the way that long com