Over the past few months, we have experienced an extremely buoyant property market with many Estate Agents overjoyed at the high demand for property almost right across the United Kingdom.
Many conveyancers and removers are struggling to cope with these levels of demand, and for those that have been in the industry a long time, we have heard the phrase “we’ve not seen anything like this since 2007” many times.
Note that 2007 (prior to the “credit crunch”) HMRC reported over 1.6 million residential property transactions in the UK. Since 2007, the highest year we have seen is just over 1.2 million transactions.
In this issue of our client briefing we return to our property trigger data to ask the question is this the beginning of the end of the busy times? Furthermore, to what extent is this the results of Lockdown 2.0?
Before we assess demand for UK property, we should briefly have a look at supply.
Supply – Volume of Properties Entering the Market (New Instructions)
The following chart illustrates the volume of properties entering the market (newly instructed) per day, expressed as a 7 day moving average…
One can clearly see that the volumes of New Instructions have been falling since the beginning of October 2020. In fact, there has been a 47% contraction in supply between the 1st October and today. Even in the last few days, we see that the volumes of New Instructions are falling again, perhaps as Lockdown 2.0 starts to take shape and vendors minds turn to other factors, such as the run up to Christmas.
Our analysts took a detailed look pre and post Lockdown 2.0 to ascertain how much of the fall in new instruction volume was seasonal versus other factors (i.e. Covid-19). 75% of the fall in new instruction volume is occurring due to seasonal factors. Which conversely means that Lockdown 2.0 is not having a massive impact on the supply of new properties for sale.
Demand – Volume of Sales Agreed
The following chart illustrates the volume of properties having a sale agreed on them per day, expressed as a 7 day moving average…
Similar to new instructions, we see the volume of sales agreed on property falling in 2020 since the beginning of October. Although the contraction is nowhere near as stark, daily volumes of sales agreed have dropped by 19%.
With sales agreed however, the key difference on this chart is what happened in 2019. Sales Agreed last year in this timeframe did fall, but at a much lower rate than the fall occurring in 2020.
Whilst it is quite difficult to see from the graph, we had our analysts take a detailed look pre and post Lockdown 2.0 to ascertain how much of the fall in sales agreed volume was seasonal versus other factors (i.e. Covid-19). This time, the result is only 60% of the fall in demand is seasonal and 40% is down to other factors. We therefore conclude that Lockdown 2.0 at the minute is having more of an impact on demand than supply.
The big question is will these falls continue?
The answer is yes, the property market slows down at Christmas every year and to this end, it is sure to happen.
However, let’s look on the positives. Demand, although falling is still some 1,400 sales agreed per day higher in 2020 than it was in 2019. This is 44% higher right now.
And with supply, at the minute we are 660 new instructions per day higher in 2020 than it was in 2019. This is still 18% higher right now.
At any time since the market reopened after Lockdown 1.0 you would take this as a result.
However, the biggest issue is that demand is now outstripping supply by 200 properties per day. Any economist will tell you that this is an unsustainable situation, and a correction is required:
- Supply must be increased (more new instructions)
- Prices must rise or
- Demand must fall (less sales agreed)
At least one of these and more likely 2 or 3 must happen and very soon.