As has been widely reported, the UK prime residential property market – broadly the top 5-10 per cent of the market by value – has seen an exceptional level of activity since lockdown was first lifted earlier this summer. Our statistical analysis of the market, including a forensic look at buyer behaviour, web visits, viewings and new instructions – all of which point to likely future activity – suggests there is little sign of that abating.
But what is really going on? Is it all plain sailing for buyers and sellers alike? What factors are at play? Will the latest restrictions disrupt this purple patch? And is the upturn really sustainable?
Clearly huge levels of previously pent-up transactional activity have been building since the residential market reopened its doors. Yet it is important to point out that this is a very different recovery to the one that followed the global financial crisis (GFC) of 2008.
This time the rapid surge in sales is not being matched by subsequent increases in property prices across our prime markets: neither do we expect this to happen in the short to medium term. Buyers are not chasing a diminishing amount of stock, driving prices upward.
In today’s market, not only is there a massive upswing in buyer demand, but importantly a great number of new properties are being launched on to the market. After many long weeks of looking at our four walls, and thinking about where and how we would really like to live our lives, more of us than ever before are taking the plunge and putting our houses on the market.
Indeed many of our ‘discretionary sellers’ who were previously sitting on their hands – perhaps waiting for Brexit uncertainty to pass – are now putting quality of life first and making the decision to move.
So while we are seeing a larger pool of buyers than at any time last year, they are in the enviable position of being able to choose from a wider selection of properties. We anticipate that this healthy alignment of supply and demand will keep prices stable and prevent the market from overheating. And although there may be uplifts in particularly desirable hot spots across the UK, we see this more steady trend persisting for some time.
The Savills under-offer bank is as strong as it’s ever been: a record number of buyers have had their offers accepted and are waiting in anticipation to move into their new homes. However, several factors are slowing the time from offer agreed to an exchange taking place.
There are a number of professionals involved in any house move and our agents are regularly talking to a host of lawyers, surveyors, brokers and lenders right across the country. After a period of lockdown, most conveyancers are now working at full capacity in order to make these moves happen and, having perhaps been compromised by furlough, are doing their utmost to power through a vast backlog of transactions.
The surveyors I work with tell me they are similarly challenged for the same sort of reasons. This means that in England and Wales (unlike in Scotland where the Home Report Survey is carried out by the seller even before the property hits the market), a buyer can face a four-week waiting list to obtain a survey.
All of this can have huge impacts for buyers and sellers. Indeed for an agent, now more than ever, it is a full-time job simply oiling the wheels of a deal that has already been agreed, in order to keep the sale on track.
And there are also considerations when it comes to securing a mortgage. The Bank of England’s mortgage approvals data for August show a 28 per cent monthly increase in the number of approvals for house purchases, bringing them to their highest levels since October 2007, some 29 per cent higher than the same month last year. A number of the larger high street lenders, having already met their lending targets, are beginning to withdraw some of their more generous products and are able to cherry pick how much they will lend and to whom.
The current stamp duty holiday until 31 March 2021 is undoubtedly playing its part in fuelling demand for residential property in England and Wales. While support regarding the equivalent Scottish Land and Buildings Transaction Tax (LBTT) is limited to the lower end of the market, moving house across all price bands in England and Wales has become considerably more affordable. However by its very nature, this tool to support the housing market is time limited and it will be interesting to see what happens following its withdrawal.
Looking to the future we can take encouragement from the fact that although the number of international visitors to properties on our website has risen steeply in recent months, with interest from Germany, the Middle East and Canada at record levels, the surge in sales has relied on UK money. There certainly appears to be pent-up demand for UK property from international buyers who wish to view in person when travel restrictions ease.
Housing is being been seen as an ‘essential’ sector by governments on both sides of the border, and it is likely that people will be able to continue to rent and buy despite latest restrictions.
A few extra protocols are being introduced to keep people as safe as possible, such as restricting the numbers of those attending a viewing, the mandatory wearing of face coverings and gloves, and temperatures are being taken of anyone entering Savills branches as a matter of course.
Meanwhile, virtual viewings and online market appraisals are proving effective when it comes to our more vulnerable clients. Following the guidelines will mean agents can continue to provide the best possible service to buyers and sellers, and there is no reason for the momentum that we’ve seen in recent months to be derailed.
Savills research predicts an active prime market in the medium term, fuelled by buyers in search of homes and communities that offer sanctuary and space. Given the factors impacting the market – from increasing supply levels to the bottleneck of exchanges developing as the end of the stamp duty holiday grows nearer – it is essential that all those involved in the process do not become carried away by headlines.
To achieve a fully functioning housing sector in the long term, where people can move freely up and down the market, an equilibrium in supply and demand needs to be maintained, and this will depend on realistic prices being set.
This content was originally published here.