Housing Demand Spike Will be Temporary, Says Zoopla

The housing demand jump experienced once the housing market reopened will be short-lived, according to Zoopla.

The property website expects the jump in demand to be temporary, and that projections for a significant economic decline and rising unemployment will moderate further growth. 

Housing demand hit its highest level since before lockdown after the government reopened the market two weeks ago, and Zoopla says it expects sale volumes to increase further in the short-term.

But the rate of house price growth will stagger during the summer months, once the impact of the coronavirus pandemic on the housing market becomes evident.

Richard Donnell, director of research and insight at Zoopla, said: “The scale of the rebound in demand for housing is welcome news for estate agents and developers, but it is also surprising given projections for a sharp rise in unemployment and a major decline in economic growth.

“The economic impacts of Covid-19 will grow in the coming months and uncertainty is building. The majority of would-be movers plan to continue their search, encouraged by low mortgage rates and continued government support for the economy. 

“However, we expect the latest rebound in demand to moderate in the coming weeks as buyers and sellers start to exert greater caution. Further support from the government can’t be discounted and would help limit the scale of the downside risks.”

(MORE: £82bn Worth of House Sales Suspended Due to Lockdown, Zoopla Reports)

What Happens Now?

Zoopla says there are two salient aspects to consider when predicting housing patterns for the rest of the year. 

Firstly, having calculated that 373,000 sales were suspended during lockdown, Zoopla says it is unclear how many of these sales will make it to completion. 

Around 40% of prospective buyers put their plans on hold during lockdown, citing deterrents such as market uncertainty, loss of income and reduced confidence in future finances.

Secondly, will the pent-up demand post-lockdown actually convert into new sales? Zoopla said a return of pent-up demand was to be expected, but the pace will likely drop given “the typical two-month lag between new demand entering the market and sales being agreed”.

Moreover, while buyer demand spiked by 88% across England once the housing market reopened, not all demand will be met if available supply does not increase.

Donnell added: “Many households are likely to have re-evaluated what they want from their home. This could well explain the scale of the demand returning to the market. We need to see more supply come to the market to satisfy this demand.”

The housing market is yet to reopen in Scotland, Wales and Northern Ireland. 

(MOREAnnual House Price Growth Increases by 3.7% in April, Nationwide Reveals)

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