Rebound in sale volumes greatest in southern regions

Since the start of 2020, total new sales agreed are 3% ahead of the same point last year. This is despite the lockdown and temporary closure of the housing market over the spring.

Sales volumes are greater than this time last year across southern regions led by the South East, London and the East of England where transactions have rebounded off a lower base. In contrast, Wales and Scotland had a longer market closure than England and year to date sales still lag last year.

Levels of demand moderating off a high base

Sales volumes lag demand which continues to moderate. This is to be expected given 1) the sheer scale of new buyer interest over the summer and 2) what is typically the start of a slower period for new buyers entering the market.

New buyer enquiries over the last two weeks have slowed to pre-COVID-19 levels but remain 46% higher than a year ago.

Sales inventory 18% higher than a year ago

More buyers in the market means an increase in the supply of homes for sale. Levels of sales inventory are currently 18% higher than a year ago across Britain.

The growth in supply compared to last year is below average in northern regions where market conditions remained stronger over 2019 with decent levels of stock availability.

In London, available inventory is currently 39% higher than a year ago as stronger market conditions bring more sellers into the market after a prolonged period of weaker sales volumes and price falls over 2018-2019.

More supply brings greater choice for buyers and will act to keep house price growth in check. Much of this supply is also at higher average sales prices than a year ago creating something of a risk to future sales volumes should demand weaken materially in the first half of 2021.

Headline measures mask increasingly polarised market

While national measures of housing market activity point to strong market conditions, the picture is far from uniform across the country.

The housing market is not immune from economic pressures resulting from COVID-19. The recession and rising unemployment is impacting parts of the housing market, but this is being masked by strong market conditions in other areas.

An analysis of where new sales have been agreed over the last 2 months cut by the demographic profile of households in the local market (using CACI’s ACORN profiling system) shows a clear shift.

Growing economic uncertainty and reduced credit availability mean a relative decline in the share of new sales being recorded in less wealthy demographics where households are more sensitive to changes in the economic outlook and the availability, pricing and terms for credit.

In contrast we have seen an increase in new sales in areas with wealthier demographics where home-owners have been less directly impacted by the recession so far.

This changing mix of sales mirrors the trends immediately after the global financial crisis with more movement amongst existing owners with larger homes. There is also a correlation with more sales and movement among households in southern England.

We believe this polarisation in market activity is likely to become more apparent by mid-2021, after the post-lockdown rush has worked its way through the system.

Strong end to the year but uncertainty over 2021 outlook

Levels of housing market activity are slowly becoming less frantic as we approach the year end. There is a sizeable pipeline of business for the industry to convert into completed sales and fee income.

The stamp duty deadline will focus the minds of committed movers in the near term and make for a strong first quarter of sales completions in 2021.

The outlook for the remainder of 2021 is less certain and we consider the outlook for the year ahead in more detail in next month’s index report.