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Zoopla: New sales agreed in June ran 28% above pre-lockdown levels

New sales agreed ran 28% above pre-lockdown levels in June, as the surge in demand converted into actual sales, according to the monthly House Price Index by Zoopla.

The market suspension during lockdown reduced the flow of new supply and sales agreed by 90%.

While these measures are now rising ahead of their pre-COVID levels, the increase in sales and supply since the start of the year is lagging 20% behind compared to 2019.

In contrast, in June 2020 demand from buyers was double that of the same period in 2019.

On a cumulative basis, since January 2020, demand ran 25% higher than the same period in 2019 despite the lockdown and market closure.

Zoopla’s analysis suggested that this was primarily ‘catch-up’ demand for what was lost over lockdown, and estimated that returning buyers accounted for 80% of levels that would have been expected over this period in 2020 had COVID not struck.

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Regional cities across the north of England recorded stronger growth in demand in the first half of 2020 compared to 2019, while new supply was hit countrywide as a result of the market closure.

Top of the list for demand are Sheffield, Liverpool, Manchester and Nottingham, which are all in the top fastest growing cities in terms of house price growth.

Short-term demand for city living is holding firm, despite predictions that it would fall. Research has suggested that COVID-19 has boosted demand for homes outside major cities; however, Zoopla said it expects this to be a one-off factor rather than a long-term shift in consumer attitudes.

London ranks fifth for growth in demand since the start of 2020; this demand has seen a modest shift away from the centre, towards the suburbs and commuter belt.

Despite an overall decline in annual transactions, London enjoyed an immediate boost to sales agreed following the temporary stamp duty holiday implemented by the government.

New sales agreed increased by over a quarter (27%) in just two weeks in London, which was geared to benefit most from the changes.

This boost to transaction volumes was not replicated in other regions, where average property prices are lower and less responsive to stamp duty amends.

While stamp duty relief will support demand in higher value markets across southern England, Zoopla said this was unlikely to sustain demand indefinitely into 2021.

UK house price inflation in the 12 months to June 2020 rose to +2.7%, registering the highest level of annual growth for almost two years.

By contrast, the monthly rate of growth has halved to 0.2% and the city level price indices registered slower growth still as a result of lockdown and reduced pricing evidence.

While there was a wide variation in annual growth rates across the country, there was no evidence of material, localised annual price falls at a regional or city level.

Based on current trends, Zoopla predicted that the headline annual rate of growth is set to remain positive, as the growing imbalance of supply and demand is set to support prices for the remainder of the year.

Richard Donnell, research and insight director at Zoopla, said: “COVID and the lockdown have shifted the dynamics of supply and demand across the housing market.

“The staggered reopening of housing markets across countries and the added impetus from the stamp duty holiday mean we expect buyer demand and new sales volumes to hold at current levels over the next two months.

“The net result will be continued support for house price growth at current levels over the second half of the year.

“Regional cities in northern England and the Midlands have the strongest underlying trends.

“For those operating in the market, and others looking in, the latest forecasts for increased unemployment and a sharp economic contraction over the next 12 to 18 months certainly seem at odds with current levels of sales market activity.

“We expect rising unemployment to weigh on market activity over the final quarter of 2020 and into the first half of 2021.

“The impact on pricing looks set to be pushed into 2021 as a result of sizeable government support for the economy.

“Further support cannot be ruled out while forbearance by lenders, and the availability of the mortgage payment deferrals, which can start up until the end of October for three to six months, is likely to limit the scale of downside for house prices.

“Much depends on how businesses respond to the outlook and their decisions on staffing levels and the knock-on impact for unemployment.”

By Jessica Bird

Source: Mortgage Introducer

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UK house price growth to remain positive over the next quarter – Zoopla

The latest Zoopla House Price Index has been published, with the bulk of new pricing evidence coming from sales agreed before the lockdown.

Data on pricing for new sales agreed in the last four weeks is starting to feed through and points to a resumption in the upward pressure on house prices seen at the start of the year.

As an example, average asking prices for properties marked as sold on Zoopla, which were rising at 7% in the first three months of the year, have returned to registering a similar growth rate over the first two weeks of June.

Near-term outlook for house prices

Most of these new sales agreed are likely to complete between August and October 2020, which Zoopla expects will show sustained UK house price growth of between +2% to +3% over the next quarter, once they feed into the index.

While some have forecast annual house price falls over calendar year 2020, the portal expects any price falls in the house price indices only to crystallise in the final months of the year.

Economic impacts of COVID-19 to hit home in H2 2020

After an initial rebound, demand is expected to weaken over the summer months as the economic impact of COVID starts to materialise, with figures reported last week by the ONS indicating an acceleration in unemployment.

Caution amongst lenders and more limited availability of 90% loan to value (LTV) mortgages will reduce demand, particularly amongst first-time buyers who, over recent years, have been the engine of the housing market.

In 2019, a fifth of all homebuyers purchased a home with a deposit of 10% or less, so a decrease in the availability of 90%+ LTV mortgages could preclude this cohort of would-be buyers from entering the market, effectively reducing demand.

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Government and central bank support will continue to play an important role in how the economy fares with a knock-on impact for the strength of consumer sentiment.

Retail sales, for example, rebounded more than many expected in May.

While almost a fifth of mortgage holders have taken payment holidays, borrowers are able to take these up until the end of October 2020, meaning support is extended for the rest of the mortgaged sector up until April 2021.

Further support and innovation to support the economy and the housing market cannot be ruled out in these unprecedented times, which will limit the downside, albeit not completely.

Strongest sales rebound in northern cities

New sales agreed, subject to contract, have grown the most in England where the market is open for business.

The rebound in sales has been strongest in northern England, led by Leeds, Sheffield and Manchester where sales are up to 20% higher than in February 2020.

In cities where sales are not keeping pace with pre-COVID levels, including Glasgow, Newcastle and Cambridge, this is down to a lower supply of homes for sale.

Level of homes for sale (inventory) in these cities is significantly lower than last year.

While the new flow of homes for sale is back to pre-COVID levels, the number of homes for sale per estate agency branch is 15% lower than a year ago.

This is a result of the market closure at what is a busy time of year.

Stock levels in Cambridge, for example, are up to 40% lower year-on-year.

Zoopla says that the lack of supply supports their view of house price growth holding steady in the short term.

House price growth

UK house price growth is up 2.4% on the year, and has increased from 1.6% at the start of 2020.

The 20 city index registered slower growth over May, slowing to +2.1% from 2.4% in April as less pricing evidence dragged the growth rate lower.

The city with the highest rate of house price growth over the past 12 months is Nottingham (4.3%), followed by Manchester (3.9%).

Meanwhile, Oxford (-0.6%) and Aberdeen (-2%) have recorded modest price falls.

Regional momentum

Activity levels are expected to rebound in Scotland, Wales and Northern Ireland as these markets reopen and pent up demand is released.

These countries account for less than a fifth of UK housing sales but more activity will support headline measures of demand and market activity in the immediate term.

The Welsh market opened on Monday but demand for homes has been building since the English market reopened, gaining momentum over the last two weeks.

Demand for housing in Wales has now rebounded close to what has been recorded in England.

Sales agreed, however, remain 65% lower than pre-COVID levels in Wales as the physical viewing of property has not been permitted.

Zoopla expects sales volumes to increase over the rest of June and into July, mirroring the rebound in England.

Scotland’s market, which reopens later in June, has seen a similar trend with demand recently returning to pre-COVID levels, but with sales volumes lagging well behind.

Commenting on the findings Richard Donnell, Director of Research & Insight, said:

“The rebound in housing market activity has taken many in the industry by surprise.

“It is welcome news given the projections for falling economic growth and rising unemployment.

“Estate agents and developers are responding and using the upsurge in demand to rebuild their sales pipelines and open up their developments.

“We see returning pent up demand and new buyers entering the market creating upward pressure on prices in the face of a lower supply of homes for sale which has been exacerbated by the lockdown.

“House price growth is set to hold up in the near term and we expect the downward pressure on prices to come in the final months of the year as demand weakens.

“While the average asking price for homes marked as sold on Zoopla are 7% higher than a year ago this is down to an increase in sales in higher value markets where activity has remained subdued in recent years.

“We do not expect the rate of growth in the Zoopla House Price Index to reach this level, rather it is expected to hold steady at 2%.

“The Welsh housing market opened this week and levels of demand have already returned close to the levels seen in England in anticipation of the market reopening. Scotland, where the market reopens on 29 June has also seen demand rise back to pre-COVID levels but sales remain more than two thirds lower and are expected to rebound in the coming weeks.”

Source: Property Industry Eye

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Zoopla Finds Sign Of Life In Housing Market

Lockdown conditions have left 373,000 property purchases stuck in the system, says property website Zoopla in its latest UK Cities House Price Index.

Mostly comprised sales agreed between November 2019 and February 2020 and worth an estimated £82bn, these transactions would normally have been completed between April and June. They still ‘may complete’ later in the year but ‘the outlook for sales progression depends upon how long the restrictions remain in place, the scale of the economic impact, and how this impacts would-be buyers and their ability to proceed with sales’, said Zoopla.

For now, uncertainty about the future of the housing market continues while estate agents face the possibility of missing out on £1bn in revenue.

Zoopla, however, remains reasonably optimistic about the future once the coronavirus crisis has passed.

Demand for homes, as measured by enquiries and online browsing, fell by 70 per cent in March but has now bottomed out. ‘There has been an increase in demand over the three weeks to 19th April’, said Zoopla.

‘Browsing of property listings fell in line with demand but to a lesser degree. Levels have bounced back more strongly over the last three weeks, but remain 35 per cent lower than the start of March.

Meanwhile, ‘the number of homes for sale is just 4 per cent lower than at the start of March, signalling no mass withdrawal by vendors’.

Amazingly, new sales are still being agreed during the lockdown, albeit at a tenth of the levels recorded in early March. ‘Some buyers seemingly want to press ahead with agreeing sales, encouraged by government support for the economy and low mortgage rates’, said Zoopla.

Even so, with the long lead time between the ‘sales agreed’ and ‘completion’ stages, this suggests total house sales completed this year could be half those of last year.

Not all areas are affected evenly. The drop in demand was up to 80 per cent in Cardiff, but only 48 per cent in Newcastle, ‘where market conditions were already weaker’. Over the last two weeks, demand for housing in cities across northern England has rebounded more strongly – notably in Manchester, Liverpool and Leeds, said Zoopla.

‘These are all cities where 2020 started strongly and where housing affordability remains attractive, and where we could see a faster bounce-back when restrictions lift.

‘By contrast, higher value cities such as Cambridge, Edinburgh and Southampton have not yet recorded any material improvement in demand over the last few weeks’. There are still low levels of demand but a limited improvement so far.

It is too early to predict the overall effect of the coronavirus crisis on house prices although the latest Cities Index registered the lowest monthly growth for over a year, at 0.1 per cent – just a third of the monthly growth rate recorded in January and February. ‘The five best performing cities recorded year-on-year growth of over 3 per cent, with Nottingham leading the charge with an annual growth rate of 4.1 per cent’, said Zoopla.

‘Without doubt, once the coronavirus restrictions are relaxed, we should expect the release of demand that has been building since Brexit and political uncertainty destabilised market sentiment’, commented Zoopla director of research & insight, Richard Donnell.

‘Many households have spent more time at home in the last few weeks and some may feel the urge to move and find more space or consider the potential for remote working. This could boost activity in the second half of 2020, but this all depends upon how much the economy is impacted over the rest of the year and the impact on levels of unemployment. It is too early to register any pricing impact given new sales volumes are 90 per cent down on the start of March. Demand is rising but there is a long way to go until we see a return to typical levels of market activity’.

Source: Residential Landlord

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Zoopla says lower house price growth is ‘the new normal’

Lower house price growth is “set to be the new normal,” according to analysis by property site Zoopla.

It said in a report published on Monday the average home in UK cities had increased by 54% over the past decade, up £90,000 in value.

But it predicted lower average growth of 3% in cities in the year ahead, compared to an average of 4.4% a year over the past decade.

The past three years have seen a slowdown in the property market, particularly in London, the south and east of England as Brexit uncertainty, tax reforms, and a weaker economy have dampened growth.

Growth in London has edged upwards recently to 1.7%, with a lower number of homeowners willing to sell fuelling increased competition. But that still marked a growth rate just a third of the 5.4% average for the past 10 years.

Zoopla predicts only a limited level of pent-up demand to increase sales and prices in the wake of the election result, with average city price growth of 3% forecast in 2020.

Richard Donnell, research and insight director at Zoopla, said: “The election result provides an element of certainty for households looking ahead to 2020, but the result changes very little in terms of housing market fundamentals.

He said affordability was key, and would “dictate the level to which prices will increase” in the year ahead.

Donnell said falling prices and rising wages had given only a “modest” boost to affordability in southern cities such as London, Oxford, and Cambridge.

The price-to-earnings ratio, a key measure of affordability, has dropped by 10% in London from a 20-year high of 14 times average incomes in 2017. But prices remain 12.7 times higher than average pay in the capital, with many Londoners’ chances of getting on the property ladder still slim.

Zoopla’s analysis suggests the boost to prices from lower interest rates has run its course, “which means house prices are set to rise at a lower rate in future,” closer to average earnings.

But the picture varies significantly by region, with cities where property is cheapest typically recording the highest recent, current, and predicted future growth.

Zoopla said the most affordable cities, such as Glasgow, Liverpool, and Belfast, had seen growth twice as fast as the UK average over the past decade.

While the property site’s analysts expect the affordability problem to hold down growth to 2% across London in 2020, they expect growth of up to 4% in the most affordable cities.

The figures also show Edinburgh, where the average home costs around £21,000 more than the UK average at around £241,000, has seen the fastest growth over the past year. Prices rose 5.4% in the year to November 2019.

Donnell added: “As we start the next decade in housing, a top priority for the new Government is to ensure we look to remove the barriers to households moving home, with housing policy catering to the different market conditions across the country, while increasing housing choice across all tenures.”

By Tom Belger

Source: Yahoo Finance UK

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Zoopla to ban benefits restrictions in rental adverts

Property advertising platform Zoopla is set to change its terms and conditions to prohibit renting restrictions for tenants in receipt of benefits.

The move follows calls by the government and charities for lenders, insurers, property agents and ad sites to review their approach to ‘no DSS’ discrimination.

A campaign to lift such restrictions began last year when one landlord claimed NatWest threatened to revoke her buy-to-let mortgage when the bank discovered she was renting to a benefits claimant.

Helena McAleer, a landlord from Northern Ireland, contacted the bank to discuss releasing equity from her property – but instead Ms McAleer claimed the lender revoked her mortgage citing its policy prevented rentals to benefits claimants.

At the time NatWest’s buy-to-let eligibility criteria read: “We will not consider multiple tenancies, Homes of Multiple Occupancy, bedsits, DSS tenants or ‘Related Person’ tenancies.”

The campaign gained widespread support, with the Residential Landlords Association calling on the government to use its influence as a shareholder in certain banks to end the “discriminatory” practices.

In 2017 research by the RLA found 66 per cent of lenders representing 90 per cent of the buy-to-let market did not allow properties to be rented to tenants in receipt of housing benefit.

At the beginning of this month NatWest lifted all restrictions on its buy-to-let customers renting to tenants in receipt of housing benefits.

Zoopla has now followed suit, announcing it will launch additional measures over coming weeks in support of “further minimising blanket restrictions” which apply to renters who receive housing benefit.

Due for implementation in April, Zoopla will amend its member terms and conditions to “specifically prohibit” the inclusion of “no DSS” restrictions on its site, remove “no DSS” references from listings uploaded on its site and remove the “no DSS” field in its cloud-based software products.

Charlie Bryant, managing director of Zoopla, said: “We fully support the recommendations of the National Landlords Association and the Residential Landlords Association, which oppose blanket bans against tenants in receipt of housing-related benefits, and are pleased to be taking action which clarifies this position.

“All tenants who are looking to rent a property deserve the chance to be fully assessed for their suitability and matched to a home that suits both their and the landlord’s circumstances.

“We proactively sought the views of our largest lettings-focused agents to ensure the above measures were undertaken on a collaborative basis and received significant support in respect of our proposed additional measures.”

Natwest and Co-op banks, Kensington Mortgages, Nationwide Building Society have been invited to give evidence on their policies in relation to tenants in receipt of benefits – the date was originally set for March 20, but this has now been postponed.

By Rachel Addison

Source: FT Adviser

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One in ten rental properties listed on Zoopla specify ‘no benefits tenants’

One in ten rental properties being advertised on Zoopla explicitly exclude anyone who is claiming benefits, research claims.

Analysis by the National Housing Federation (NHF) of 85,912 properties listed for rent across England on Zoopla this year found 8,710 that openly said “No DSS” or similar.

Separately, Shelter has conducted a mystery shopping exercise on Gumtree and SpareRoom.co.uk, finding that applicants who mentioned that they were claiming benefits were more than twice as likely to get negative responses as those who did not.

While it is not unlawful to refuse to let to people on benefits, Shelter has earlier argued that excluding benefit claimants is discriminatory and has been rumoured to be considering a legal case under the Equality Act.

The issue has prompted much debate on EYE, with agents stating it is landlords who want this exclusion due to the perceived higher risks of rental arrears, while groups such as the Residential Landlords Association have blamed the terms and conditions set by mortgage lenders.

The NHF said that the “blatant discrimination” against people on benefits must stop.

It has issued a series of recommendations.

It calls for agents and their professional bodies to ensure all renters are treated equally, and that such exclusions are refused on listings sites.

It also wants landlords to stop using letting agents who advise against letting to tenants on housing benefit. The NHF said landlords should instead assess each tenant based on the property and whether they can afford it, rather than where the money comes from.

The NHF said: “We are calling on everyone involved in the lettings industry to take action to stop the unfair treatment of people who claim housing benefit.

“This change requires agents, landlords, mortgage lenders, insurance providers and the Government to commit to ensuring that all renters are treated equally, regardless of whether they claim housing benefit.”

Separately, Universal Credit has been blamed for a spike in buy-to-let mortgages that are in significant arrears.

Data from UK Finance shows that the number of buy-to-let loans with more significant arrears of 10% or more was up 3% annually to 1,150.

Mark Pilling, managing director at Spicerhaart Corporate Sales, which deals with arrears and repossessions on behalf of lenders, said these figures suggest issues with Universal Credit are starting to impact landlords.

He said: “Last month, the Residential Landlords Association revealed that 61% of landlords with tenants receiving Universal Credit have had problems with non-payment and arrears, and on average, these tenants owe 49% more than they did a year ago.

“Universal Credit has been plagued by problems since it was introduced, and while the Government announced in the Budget that more money will be dedicated to the new welfare system, it is clear that much of the damage has already been done.

“Many claimants experienced huge delays in receiving their money, forcing them into arrears, and many are receiving far less than they did with the old system, which means in many cases they simply do not have enough money to pay their rent on their reduced incomes.

“From a lender’s point of view, it is important that they keep a close eye on their buy-to-let customers who have tenants who are on or are soon to be moved on to Universal Credit so they are able to work out the best solution for those who are struggling so that repossession is a last resort.”

Source: Property Industry Eye