In this issue we decided to examine property prices, specifically looking at the changes in Sales Agreed since the start of January 2020.
The National View
The following chart shows the change in Sales Agreed volumes from August 2020 (Post-Covid lockdown) compared with January 2020 (Pre-Covid).
The first striking thing about the chart above is that there have been increases in the volume of sales agreed across all price bands. Overall, the volume of sales agreed in August compared to January 2020 has risen by almost 80%.
Property with lower prices have seen modest increases in sales agreed with the properties priced at less than £150k seeing a 37% increase and £150k to £250k band at 57%. All price brackets above £350k have seen greater than average rises. In particular, sales agreed on properties priced between £750k and £1m have risen by nearly 168% whilst the next bracket down (£500k-£750k) has also experienced similar increases.
Sales agreed on property priced above £1m have also increased substantially but in volume terms this is less than 2.5% of the total overall marketplace.
Whilst this is the national picture, pretty much every region in the UK follows the same trend – with lower priced properties performing less well and substantially more sales agreed in the upper-middle priced properties. There are however a couple of key differences which can be observed by looking at the South versus the North.
If we draw an imaginary line from the mouth of the river Severn (near Bristol) to the base of the Wash (in East Anglia), the following chart portrays the change in Sales Agreed volumes from August 2020 (Post-Covid lockdown) compared with January 2020 (Pre-Covid).
The main difference observed here is that the volume of growth in the lower priced brackets is significantly lower in the South than nationally with the less than £150k band only increasing by 18%.
If we take everywhere in the UK north of our imaginary line from the river Severn to the base of the Wash, the following chart portrays the change in Sales Agreed volumes from August 2020 (Post-Covid lockdown) compared with January 2020 (Pre-Covid).
The main differences observed here is any price band higher than £250k displays a much more dramatic improvement in sales agreed volume when compared to the national picture. In fact, sales agreed in the £1m to £2m price bracket saw the highest increase at nearly 250% (although were only 0.4% of national total).
In addition, even though sales agreed are rising much slower in the two lowest price brackets, these two price brackets combined still accounted for nearly 67% of all sales agreed in the North.
A Covid-19 lockdown has had an effect nationally with mid to higher priced properties being sold at a much higher rate and growth in lower priced properties being significantly slower – why?
What is responsible for the high growth in Sales Agreed in the mid-higher tiers of property prices?
There are undoubtedly many issues at play here that we have spoken about in prior client briefings; the underlying property market strength is robust and this, coupled with the fact that we are currently experiencing a high level of pent up demand from Covid-19 lockdown, means that sales agreed numbers overall are very high.
However, the answer to the question “why sales should be disproportionately high in the middle and higher property prices?” is a lot to do with the stamp duty holiday which started on the 8th July 2020. In effect, the buyers who stand the most to gain from the stamp duty holiday are purchasers of mid to higher priced property – buyers now save £15k on the purchase of a £720k property.
What is responsible for Sales Agreed growth being slow at lower property prices?
Well, less turnover at the lower end of property prices would suggest fewer First Time Buyers and this is borne out by some current features of the market:
- Lending is more difficult – with lenders often asking for higher deposits.
- First time buyers never really benefited that much from the stamp duty holiday because many would be buying property for under £125k which accrued no stamp duty charges anyway.
- Arguably, uncertainty in the job market is disproportionately felt by the younger elements of the workforce and as such this will affect their buyer confidence.
In summary, all areas of the UK have seen lower levels of growth for sales agreed at lower property prices and higher levels of sales agreed in the middle and upper-middle property price brackets.