Zoopla's Research and Insight Director Richard Donnell writes:
Just over a fortnight on since the Chancellor announced the Stamp Duty holiday and it has already started to provide much-needed impetus to the sales market in southern England.
Our ongoing, real-time analysis had shown that this geography had been lagging behind the rest of the country’s market recovery as we emerged from lockdown, but now there are signs of a turnaround.
Looking at Zoopla’s latest Research and Insight, we can also report that:
1. Demand, sales agreed and new supply are all rising
- Sales applicant demand is running 60% higher than pre-COVID levels. This has been boosted by the opening of the markets in Wales and Scotland and the recent Stamp Duty relief implemented in England and Northern Ireland.
- The ‘flow’ of new supply is running 20% higher than before COVID, taking average inventory levels back to the long-run average. The main risk ahead is rapid growth in ‘fully priced’ new supply in localised markets, which could impact sales rates later in the year. Needless to say that the strength of the market recovery isn’t going to encourage buyers to pay over the odds.
- Sales agreed are running 30% higher than a year ago. We expect sales agreed to continue to out-perform this same period over the summer in 2019. That said, how unemployment plays out will be key for the second half of the year, and with the government encouraging forbearance until October, it remains to be seen if and how the banks respond beyond this end date.
2. Stamp Duty changes have boosted demand in London and South East by over 20% week on week
- The Stamp Duty changes in the Summer Statement have also boosted demand from buyers across southern England. This is where there is the greatest share of sales between £400,000 and £500,000, and where buyers are set to make the greatest SDLT savings.
- In London alone, demand for homes increased by 22% week on week in London, and in the South East, by 21%, following the announcement of the Stamp Duty holiday. There was less impact in other English regions where the cost of Stamp Duty is less of a barrier for buyers.
3. Lettings market - rental growth softening led by rising supply in London
- We are coming towards what is normally the busier time of the year for the lettings market when demand trends up on graduates moving to start new jobs and with universities starting the new academic year. We expect demand to be more muted this year which will impact rental growth. Rental supply has grown in London, dragging up the average price of available rental properties which will exacerbate the slowdown in rental growth.
- The Stamp Duty changes, and modest improvements in the availability of 90% LTV loans, may act as a drag on rental demand as first-time buyers look to the sales market. We expect rental growth to slow in the second half of the year with lower rents in higher value areas.
Needless to say we’ll continue to keep a close eye on the market in the weeks and months ahead, and look forward to sharing further research and insight in due course.
*Richard Donnell is Research and Insight Director at Zoopla and a contributor to Estate Agent Today*