Housing Demand still high – but sales may fall in 2021

THE South West housing market remains strong and is expected to stay that way for the rest of the year despite the coronavirus pandemic – but there are fears sales will fall in 2021, a new report says.

Demand for new properties, as well as new homes being listed for sale, across the South West housing market remained strong over the past month, according to the October 2020 RICS Residential Market Survey.

With current guidelines permitting the market to stay open during the second lockdown, South West respondents expect sales growth to continue for the rest of the year.

Moving into 2021, the outlook for sales is negative, with respondents citing the withdrawal of Government support measures and a difficult economic backdrop as a concern further ahead.

During October 2020, the number of people looking to buy a new property across the region remained positive for the sixth consecutive month, with a net balance of +36% of respondents citing an increase in new buyer enquiries down from +63% reported in September.

In keeping with the growth in demand, the number of new properties being listed for sale also increased for the sixth successive report.

A net balance of +11% of respondents reported a rise in new instructions in the South West. This is the longest run of growth seen in the RICS Residential Market Survey since 2016.

The number of properties sitting on estate agents’ books remains relatively low in the historical context, but October saw average stock levels move up from 46 to 48 per branch across the region.

As more properties are listed for sale and the pent-up demand continues, the number of agreed sales in the South West continue to rise. In October, +34% of contributors saw a rise in transaction volumes which remains well above the average readings.

Looking ahead, respondents remain positive about activity for the coming three months, with +15% more contributors expecting sales to rise in the South West. The outlook for the year ahead, however, is negative, with -44% of respondents anticipating sales to fall over the longer time frame.

The impact of the recent increased sales activity continues to see house prices rise. The three-month price growth expectations remained at a net balance of +25% in October, down from +26% in September. Meanwhile, the 12-month outlook points to prices rising across the region.

Simon Rubinsohn, RICS chief economist, said: “The housing market remains very busy and despite the second national lockdown, the sense is that this will persist over the coming months and into the new year.

“However, there is understandably more caution about activity looking beyond the first quarter of 2021. Aside from the withdrawal of Government incentives, the market may also find the more challenging employment picture a significant obstacle even with interest rates set to remain close to zero for some time to come.”