Q&A: ‘Covid-19 has led to a once-in-a-lifetime re-evaluation of housing requirements’
Q. Richard, the UK has gone into recession – yet the is performing at its strongest for five years. Why is that?
A. The pandemic has been the catalyst for a lot of movement. It’s led to a once-in-a-lifetime re-evaluation of housing requirements. Both homeowners and renters are reprioritising what they want in a home, resulting in an appetite for more space and changing work and commuting patterns. It has also created a lot of pent-up demand.
With half of all homeowners having no mortgage and a large part of the remainder having significant equity in their property, there’s a lot of flexibility for people to move.
Meanwhile, despite the economy contracting and unemployment rising, consumer spending has picked up and purchasing manager indices (economic indicators) suggest a wider rebound in the economy.
Every recession has different underlying drivers and this one is no different. What matters the most in the housing market is the impact on household incomes, credit availability, mortgage rates and unemployment.
Q. To what extent is the supply-demand gap closing – and why?
A. Buyers were still contacting estate agents remotely through lockdown so demand rebounded quickly when restrictions were lifted. But it was impossible for estate agents to take on new sales during lockdown. This has contributed to the supply-demand imbalance.
However, the gap is closing slowly. Over the last month, the flow of new supply has run 50% faster than the same time last year because more demand brings more homes to the market. Many sellers are also buyers. But the housing market shutdown has meant that supply is still 3% lower than this time last year.
Q. What impact has lockdown had on activity?
A. Lockdown has driven unseasonably strong interest, with the holiday season doing little to dampen the strong market conditions.
Since restrictions were lifted, homes have been selling at a faster rate across all regions and countries. At a UK level, they are transacting in just 27 days. That’s 31% lower than this time last year.