Weekly Summary: 1st June 2020

DATA: Zoopla report UK house prices rose 2.4% in the year to April 2020

This was slightly lower than the revised figure for March (2.7%) while their 20 City Index reported annual price growth of 1.9% (2.0% previously).

NEWS: Rightmove report “busiest ever day” on Wednesday 27th May

They report the daily number of visits to their website exceeded six million for the first time, with activity up 18% compared to the same day last year. However, they warn that sales agreed are 47% lower than last year.

NEWS: Zoopla report 60% of people searching for a home prior lockdown still plan to proceed

They also report large increases in activity on their website and interactions with estate agents following the end of the market lockdown but sales agreed, previously running at around 10% of normal levels, were “up 12% in the week after the lockdown”. They also warn that “We expect the recent spike in demand to be relatively short-lived, with demand likely to moderate over the coming weeks”.

NEWS: Glenigan report 47% of suspended private housing development sites have now restarted

But they also report that over 1/3rd of private residential development sites remain closed, a larger proportion than any other sector.

NEWS: Resolution Foundation report renters are more likely to have fallen behind with housing costs than home owners

Their analysis, based on a survey during 6-11 May, show 17% of social renters and 13% of private renters have been unable to cover their housing costs in recent weeks. 8% of mortgaged home owners have also been unable to. It also shows that, with less financial support, renters are more likely to have reduced their spending to cover their housing costs.

Chart of the Week

There is considerable debate about the role of density in the COVID-19 outbreak and the longer-term impact on urban living. Estate agents and listings portals are reporting increased interest in rural property and there are plenty of people suggesting urban living has lost its attraction.

A shift away from urban living would represent a big change on recent trends. For example, London’s total population has grown by 32% since 1981 compared to 19% for the UK as a whole. However, it is not just London’s total population that has changed but also the profile of its residents. One important trend in recent years, as shown below, has been the growth in the number of children living in London. The number of children aged 0 to 4 years has increased 53% since 1981 and the number aged 5 to 9 years has increased 59%.

London and other urban areas will inevitably remain popular amongst younger adults given the social and economic benefits of living in denser locations. However, recent years had already shown falling numbers of younger children, and tracking the number of children living in urban areas in the future will help prove estate agents right or wrong.

Weekly Summary: 26th May 2020

DATA: ONS reports large falls in employment and income

Early estimates from HMRC’s PAYE data for April indicate a 1.6% fall in the number of paid employees and a 3.0% fall in median monthly pay compared to the previous month. Next month’s labour market releases from ONS (16th June) will cover April and provide better information on the state of the economy.

DATA: ONS reports rising house prices in March

This was the last release of the ONS index with next month’s release suspended. It show UK house prices rising 2.1% compared to March 2019. The annual change in February was also revised up, from 1.1% to 2.0%.

POLICY: HMRC report residential transactions fell 46% in April

46,440 transactions in April was perhaps not as bad as many commentators were expecting. However, this number will reflect some completions of transactions agreed prior to the lockdown, a small number agreed during lockdown, and a number of other transactions including transfers between parties on divorce, gifts, compulsory purchase orders, or under a court order.

NEWS: Mortgage payment holiday and moratorium on involuntary repossession extended until 31st October

This news will provide welcome relief for borrowers with UK Finance reporting 1.82 million mortgage payment holidays issued as of 20th May (1 in 6 mortgages). However, there will be a cost to the delayed payments and, along with the wider economic fallout, likely dampen moves by mortgaged households in the future. There is still no positive news for renters.

NEWS: Knight Frank and other estate agents report a surge in demand

Estate agents are understandably keen to demonstrate the resurgence in housing market activity with many reporting big increases in the number of prospective buyers. However, as our May Market Commentary suggests, there are severe economic and mortgage market headwinds and so there is no guarantee that this demand will translate into actual sales.

Chart of the Week

As the immediate impact of the pandemic on the healthcare system eases, attention is inevitably turning to how we exit the lockdown. Yesterday’s announcement of the timeline for retail to reopen in June is welcome but, along with other easing measures, it will be heavily dependent on the continued suppression of COVID-19 and public sentiment.

Multiple data sources, including Google mobility data below, show people and businesses locking down prior to the official announcement on the 23rd March. That suggests the success of the easing will depend on people feeling safe enough to return to normal life. Much of the recent press attention has been on people in parks, beaches, and other outside spaces but the important lines to watch in the future are the bottom three on the chart.

In related news, you can check out house prices in Barnard Castle (PDF) and 2,258 other cities, towns and villages across England and Wales on the BuiltPlace website.

Weekly Summary: 18th May 2020

DATA: ONS reported a 2% fall in GDP in the first quarter of 2020

Their monthly GDP data also reported a 5.8% fall in March though both these figures are likely to be overshadowed by falls reported in future releases. GDP and other data releases are highly likely to be significantly revised in coming months and years.

DATA: Rightmove did not publish their house price index for May

They reported the number of new listings was down 90% compared to last year so there wasn’t sufficient data to calculate the house price index. The market reopening suggests they should have enough data for next month’s release.

POLICY: MHCLG restart the housing market

The housing market reopened for business last week (Wednesday) which was much sooner than most expected. The announcement was also managed in a less than ideal way with amendments to The Health Protection Regulations 2020 appearing online, then reported by newspapers, before finally being announced by MHCLG later than evening (rather than the following day as originally intended). However, all this has been forgotten in the rush to buy, sell and rent homes again (see Chart of the Week).

NEWS: The April RICS market survey reported “prices, rents and sales expected to fall sharply in the coming three months”

All the metrics reported by RICS were negative though this was based on sentiment prior to the market reopening. Next month’s release could see big rebounds in measures.

NEWS: UK Finance reported a small quarterly increase in mortgage arrears

The number of homeowner mortgages in arrears of over 2.5% of the balance increased by 2.1% in Q1 2020 (72,380) though this is below the equivalent in Q1 2019 (76,640). The relatively small quarterly increase will reflect the forbearance measures in place but it appears likely that numbers will increase in future quarters.

NEWS: The Health Foundation reported overcrowding is highest for those with low incomes

Their chart highlights not just higher rates of overcrowding for lower income households but also higher rates of overcrowding with vulnerable household members. The quality and availability of housing is important at all times but is especially so when linked to worse outcomes for health.

Chart of the Week

This week’s chart is an update of a previous one (6th April). The chart shows the level of search activity for the two main UK property portals according to Google.
Search activity had started falling prior to the lockdown and was around 60% below Jan/Feb levels in late March. There had been a gradual increase in recent weeks, no doubt thanks to people bored at home. However, the reopening of the market last week led to big increase in searches on the 13th at only 10-15% below Jan/Feb levels. Activity over the weekend appears to have stuck at around 80% of previous levels. Only time will tell if this is just speculative searching or will translate to actual transactions.

Weekly Summary: 11th May 2020

DATA: Halifax reported UK house prices fell by 0.6% in April

This fall brought the annual change in house prices down to 2.7% (3.0% previously). Halifax warned that low transactions could lead to volatility in their data (a bit like their old index).

DATA: ONS temporarily suspend their UK House Price Index from April (March index still due to be published on 20th May)

The ONS index lags behind other measures as it is based on completions. We’re still expecting the March index release later this month but it could then be several months before the index restarts given the time it will take for transactions to complete.

POLICY: PM announces five level Covid Alert System

Apparently we are currently level 4 and moving towards level 3 (so level 3.5?). The introduction of a framework for exiting the lockdown is welcome but the PM’s Sunday evening speech raised more questions than it answered. We await the publication of the 50 page technical document later today.

NEWS: Bank of England’s plausible economic scenario: 30% fall in GDP during first half of 2020 recovering to just a 14% fall across whole year

The scenario is designed to help “illustrate the nature and potential scale of the impact of the pandemic on the economy” rather than an actual forecast. However, the assumption that the economy recovers relatively rapidly in the third quarter (July-Sept) will be very dependent on the relaxation of social distancing. The Chart of the Week highlights the magnitude of this scenario relative to previous economic downturns.

NEWS: Shelter suggest “struggling private renters face £55 million a month gap in rent without more government help”

They warn that “a tidal wave of evictions could be unavoidable when the lockdown lifts”.

NEWS: District Councils’ Network warn “half a million on brink of homelessness due to pandemic”

Disclaimer: this was analysis we conducted for DCN looking at household groups with stretched affordability in the private rented sector prior to the pandemic hitting. We published this and other analysis on the private rented sector last week: Digging Deeper.

Chart of the Week

The illustrative economic scenario published by the Bank of England would be the biggest fall in Gross Domestic Product in a calendar year since 1706 if it turns out to be correct. The ability to forecast what is going to happen let alone know what is happening at the moment will be severely hampered by available data. Normal data collection methods may not work correctly during an economic shutdown of this scale and so the data published in coming weeks and months may be volatile and subject to substantial revisions in the future.