Informing you on the volume of properties entering the market (New Instructions) and Sales Agreed has been a core foundation of ours since issue 1 of these client briefings. Through the lows and highs, we have maintained a view for you of what has happened to the property market since and in this issue, we return to this core foundation and explore whether we are perhaps seeing early signs of the market slowing.
Property Entering the Market (New Instructions)
We have reported in previous client briefings and our Property Homemover Report (available to download here https://www.twentyci.co.uk/property-homemover-report/) that the volume of New Instructions bounced back rapidly when the English property market reopened in May following the lockdown period. Pent up supply and demand, together with the Stamp Duty Holiday from July resulted in a rapid recovery of the market and rising property prices across the length and breadth of the UK (with exception to London).
It now appears to be the case that the market is just starting to slow, and this is shown in the following chart…
October 2020 saw an 18% dip in the monthly volume of New Instructions when compared to the prior month. We know that this is not down to seasonality as the differences between September and October in both 2018 and 2019 were negligible.
Despite the dip in New Instructions last month, volumes remain 16% higher than in October 2019. Our view is that pent up supply drying out and reverting to “normal” levels is probably a better explanation for the dip than uncertain consumer confidence.
This is backed up by the fact that New Instruction volumes to-date in 2020 have not yet reached the same level like for like in 2019 as shown by the cumulative lines in the chart above. 2020 is currently 5% down compared with 2019.
In contrast to New Instructions, the cumulative volume of Sales Agreed on properties in 2020 has already exceeded the same period in 2019 by 5%.
Sales Agreed volumes are displayed in the following chart…
Comparing October 2020 with October 2019, we see 39% more sales agreed in 2020 and the staggering demand for property continuing.
However, volumes of Sales Agreed in October 2020 have dropped by 5% compared with the prior month and once again this is not a seasonal change as last year. There was in fact a 10% increase from September to October in 2019.
Could this be the beginning of the end of strong property demand? Well we will have to see, but we will keep an eye on it for you as usual.
In summary, there are signs that supply is slowing, but volumes are still ahead of last year at the minute and demand is just starting to slow, but volumes are way ahead of where we were in 2019.
Regional Breakdowns – New Instructions
Taking a closer look at how the volumes of New Instructions in the last four months (June and October) vary by region, the following chart reveals great variation across the country…
Key insights from the above chart are as follows:
- All UK regions have experienced growth in New Instructions.
- London is experiencing the greatest growth in supply. With 59% more New Instruction sale listings in Inner London entering the market between June and October 2020 compared to the same period in 2019. As we have discussed in detail in client briefing issue 43, this increase in supply is not being met by buyer demand and suggests a fall in prices in the short term.
- The South (excluding London) and West Midlands are also seeing substantial increases in new listings volumes when comparing June – October 2020 to 2019 by between 20-30%.
The North East is the slowest to recover. The region is experiencing the lowest increase in the total number of New Instructions in the last four months compared with the same period last year.
Regional Breakdowns – Sales Agreed
In terms of the Sales Agreed volumes by UK region, we have identified East of England and the South East as the highest growth regions, with over 50% increase comparing June – October 2020 to the same period in 2019. This is shown in the following chart…
While Inner London had the largest increase in New Instructions, the difference in Sales Agreed is a rather underwhelming 34% – like East Midlands (34%) or Yorkshire (35%). The high supply growth and modest buyer demand for London properties further supports the widely reported preference of today’s buyers for larger suburban and rural properties, with gardens and more space for a home office.
The following final chart compares percentage increases in demand with percentage increases in supply (simply by subtracting one from the other)…
In summary, property supply is outstripping property demand in Inner and Outer London, which as suggested above might well lead to downward pressure on prices. This is a buyer’s market.
However, property demand is outstripping property supply in all other areas of the UK, with particular hot spots in the North East, East of England, North West and the South East. The market will correct this trend by an increase in supply (greater volumes of New Instructions) or further increases in price. This is a seller’s market.