Housing market mini-boom to last the rest of 2020
The upturn in home sales is expected to continue for the rest of the year, as demand for property and new homes coming to the market remained strong in October.
The number of people looking to buy a new property increased for the fifth consecutive month, according to a monthly survey by the Royal Institution of Chartered Surveyors (RICS).
More than two fifth of respondents reported a rise in transaction volumes, compared to an average reading of nine per cent over the past year.
Surveyors appear positive about the coming three months, with more expecting sales to rise.
However, next year, the outlook for sales is more subdued, with the withdrawal of government support measures and a difficult economic backdrop as a concern.
Despite the current increase in house prices, inflation is expected to temper shortly, with three-month price growth expectations moderating from a net balance of +22 per cent in September down to +13 per cent in October. And the twelve-month outlook points to a flatter trend to emerge at the national level.
Affordability challenges will persist
RICS chief economist Simon Rubinsohn 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.
“That said, medium term expectations for house prices and private rents have barely been dented by Covid according to the latest survey.
“Indeed, the projections still point to increases likely to exceed wage growth highlighting the ongoing issue around affordability,” he added.
Over-priced properties not selling
Sarah Coles, personal finance analyst at Hargreaves Lansdown, noted that buoyant house prices were encouraging overpricing, meaning some properties just were not selling with buyers are left to fight over the more realistically priced homes.
“Anyone who was planning to get in ahead of the stamp duty holiday could have shot themselves in the foot by over-optimistically pricing their property and putting buyers off,” she said.
“Meanwhile, one agent noted an ‘unhealthy sense of panic’ among buyers, desperate to take advantage of the stamp duty holiday. This is encouraging them to rush into making an offer without thinking it through, so when the sale drags on, these buyers are already poised to pull out.”
She added that lockdown could slow things up even further, with estate agents worrying that more council employees working from home could stymie searches.
“There’s a palpable sense of frustration among agents towards others involved in the process,” she continued.
“Some blame a lack of surveyors, some point the finger at lenders, and one in particular says ‘the conveyancing profession should take a hard look at themselves’.
“At some point over the next few months, we’ll see buyers realise they’re not going to get the deal done before the end of the stamp duty holiday.
“The question is whether sales will then slow to a more typical rate and price rises pause, or whether the market will be so dysfunctional by then that we see an altogether more dramatic reaction.”