Yesterday provided some very interesting housing market intelligence. Hard data from HMRC and market commentary from Rightmove showed that the only certainty is uncertainty and there is no need to rush into buying a home today if you don’t actually need to move home tomorrow. Perhaps Time, Time, Time is the new Location, Location, Location
For me, the most telling commentary was from Rightmove for whom the current level of housing market uncertainty rendered them unable to provide guidance on their future profitability. Rightmove’s revenues are generated from estate agents and housebuilders and this lack of guidance suggests to me a lack of confidence in the robustness and trajectory of the underlying UK housing market
House prices have yet to react to the Covid-19 crisis
Whilst the volume of housing transactions has been swift to react to Covid-19, house prices appear stuck in the headlights. During the credit crunch UK house prices fell on average by around 20%, but so far in the Covid crisis house prices have yet to move. I believe a house price adjustment is looking increasingly likely and now is not the time to rush into a house purchase.
Will the new normal be different to the old one?
To state the obvious during the credit crunch the issue was ‘credit’, or the lack of it and how to finance a house purchase in its absence. During the credit crunch
- we did not work from home,
- we did not question whether we needed offices
- we did not challenge the tide of urbanisation.
To a large extent house prices picked up from where they left off. There was no paradigm shift in demand.
We may find as we exit lockdown that there has been a significant demand shift with respect to housing. Why scrimp and save to live in a small city centre flat when we can work from home in a four-bed detached home in the country with a large lockdown ready garden with summer house / home office..?
Why rush to buy a home that was fit for the BC age (Before Covid), when the AC (After Covid) era may be very different. If the UK’s largest property portal is unwilling to place bets on the outcome of the remaining six months of 2020, why should homebuyers make a big bet today on the suitability (and price) of the home they may live in for the next 15-20 years?
Is time the new location?
BC the property mantra was location, location, location, but whilst we wait for the dust to settle for now it might be time, time, time. The must have BC locations may not be those of the post-covid era. With so much uncertainty it is wise to take stock and take time to think about what our homes mean to us. I did and it didn’t take me long to realise that my home is much more than the price I paid for it. I’ll be thinking hard about where I want to live, how the future of work might affect my decision and what will be the most important factors in my next home move.
For those who haven’t seen it, here’s a summary of the data:
Data from HMRC
Housing transactions in May 2020 had fallen 54% from their levels in May 2019 and 50% from their levels in January 2020
Volume of housing transactions in May 2020 were 15% below their credit crunch trough of January 2009
Housing transactions in May 2020 were however 16% higher than they were in April 2020
Commentary from Rightmove trading update
Ten of the busiest days ever on the platform since 13 May
Ten days with the most leads sent over the same period
Sales agreed are currently over 10% higher in England than a year ago
In the last seven days the number of properties added to Rightmove in England is over 10% higher than the same period last year
Too early to assess whether this momentum will be sustained
Unable to provide guidance on future profitability