The housing market continues to be extraordinarily buoyant. The average house price has grown for the sixth consecutive month to £245,443 in October. Since the market re-opened in May, prices have grown by 6.5%, or £14,238 in cash terms. On an annual basis, prices have grown by 5.4% in the year to October; by comparison a year ago prices were growing by just 0.7% year-on-year. With a record contraction in GDP and payroll data showing a cumulative fall in employment of 819,200 since February, the housing market has behaved contrary to expectations. In recent months, home buyer mortgage approvals have risen to levels not seen since 2007.
Pent-up demand from the lockdown has been driven by buyers looking for bigger homes which can accommodate home working and have more garden space. The Stamp Duty cut may have drawn in opportunistic buyers who were previously put off by high transaction costs. There data indicates homeowners with large amounts of equity are the most active, with first-time buyers making up a smaller portion of approvals.
Larger homes have seen sharper price rises this year with the average price of detached properties increase by 6.8% in the year to October, in comparison to flats and maisonettes increasing by 2.3% over the same period.
We expect to see transactions to remain at an elevated level and some price growth in the early months of 2021, but this is likely to ease as the stamp duty holiday and the furlough schemes end in late March. The expected rise in unemployment is likely to weigh on housing activity.