One of the greatest challenges for UK property professionals during the pandemic is making sense of the market data that in normal times provides important clues about the outlook for sales and lettings.
Now, uncertainty about when a vaccine will be available, national and regional lockdowns will end and the economy will recover are the greatest modern-day challenges our industry faces.
Recent economic data appears to have dashed hopes of a ‘V-shaped’ recovery. Covid cases are increasing and there are more local lockdowns and other restrictions, so a swift return to normal is increasingly unlikely. Analysis by Experian for Cluttons also highlights the slowing pace of the recovery, noting that consumer confidence is falling. The household savings ratio has jumped this year, further signalling that people may be worried about their finances. By contrast, the latest PMI data on services shows business confidence improving.
The national housing market had a very strong summer, defying the economic weakness caused by lockdowns and other restrictions. In Q3, activity levels recovered and prices increased, according to the main indicators. After the first national lockdown was lifted, UK monthly mortgage approvals rose 330%. Growth continued in July and August; the 85,000 approvals in the latter was the highest in a single month since 2007.
HMRC data on completed purchases shows January to September transaction levels were around 21% below the previous year, but some catch up is likely in the rest of the year if other signs of activity translate into sales.
Prices at record levels
All the evidence suggests average values at a national level will end the year higher than they started. While most commentators expect the pandemic and ensuing recession to cause short-term price falls, changing post-lockdown needs and a stamp duty holiday will have played some part in pushing prices to record levels on many indices.
Q4 data might show strong performance in spite of November’s lockdown, as agreed sales from Q2 and Q3 move to completion. The economic situation suggests demand may weaken early next year and the end of the stamp duty holiday, plus scaling back of Help to Buy and introduction of a further tax on overseas buyers, could dampen activity, making it difficult to see the true picture. The market could look very weak from April on, but uncertainty on the economy and public health make it tricky to predict anything beyond that.
In Q3, the national lettings market continued its post-pandemic recovery, apart from London, where high supply and low demand put downward pressure on rents. Other data showed strong rental demand outside the capital, apparently driven by pent-up lockdown demand and tenants looking for homes with homeworking and garden space.
While the sales market has proved resilient so far and rental market indicators are yet to show many warning signs, the immediate impact of the economic damage is more likely to be felt by tenants. Renters are generally younger and lower earners with less savings, and so more vulnerable to financial shocks.
Against this backdrop, it will take resilience and innovation such as that celebrated by Property Week’s Trailblazers to ensure the sector emerges from the pandemic fit for the future and ready to take advantage of the opportunities on offer. Predicting the unpredictable remains a challenge, but in 2020 we have learned many lessons when it comes to dealing with uncertainty.
Sophy Moffat is head of research at Cluttons