As the market continues its recovery following lockdown, new sales agreed have outperformed the same period in 2019 by 3%, according to the latest Zoopla House Price Index.
However, Zoopla predicted that it is unlikely that 2020 will recover the sales lost during the market hiatus, due to the lag time between sales agreed and legal completions.
Ultimately, sales are expected to run 15% below 2019 levels by the year end.
Demand was found to be 39% above the same period last year, and the uptick in buyers has released more stock into the market – sales inventory is 10% above levels of availability 12 months prior.
In terms of the source of this demand, first-time buyers (FTBs) are set to be overtaken by existing homeowners as the largest buyer demographic.
Market uncertainty due to COVID-19, combined with the recession and a reliance on higher loan-to-value (LTV) mortgages to fund purchases is thought to be affecting first-time buyers’ ability to purchase a home.
Following a spike in demand among FTBs when the English housing market reopened on 13 May, demand has trended downwards and is now back in line with pre-COVID levels.
According to Zoopla, first-time buyer demand is set to weaken further over the rest of 2020 and into 2021.
Demand from existing homeowners has shown no sign of weakening, remaining 37% higher than pre-COVID levels and 53% higher than the same time last year.
Three-quarters (75%) of existing homeowners are over the age of 45, while more than half have no mortgage, meaning 2021 could also give way to an increased volume of cash-only purchases.
Zoopla predicted that a second spike, coupled with the government’s recent tightening of restrictions, will support demand for housing in the near term.
Those in a more secure financial position – such as homeowners with good levels of equity and little to no mortgage – will likely be galvanised.
In September 2020, compared to Q1, demand among FTBs had grown the least in London (1.8%), Yorkshire and the Humber (4.8%), and the North West (9.7%).
In contrast, Scotland (83.5%), the East (66.2%) and the South East (65.8%) all registered the highest increases of demand among existing homeowners.
90% LTV lending is most accessible in housing markets with average or below average house prices, where loan-to-income limits do not exclude a high proportion of prospective buyers.
The strongest growth in recent years has been in regional markets outside of southern England, and Zoopla expects first-time buyer demand to be more affected here.
House price growth has continued on an upward annual trajectory of +2.6% as demand outpaces supply.
At a region and country level, the annual rate of growth ranges from +1.7% in the North East to +3.3% in the North West, Yorkshire and the Humber, and Wales.
Nottingham and Manchester and recording price inflation of over 4% per annum.
Alan Cleary, managing director for mortgages at OneSavings Bank, said: “House prices and housing transactions have rebounded strongly since the economy reopened. In part, this reflects the impact of the temporary removal of stamp duty on the first £500,000 of each housing transaction, but it also reflects the impact of a robust recovery in demand and supply in the wider economy.”
“With borrowing costs set to remain at historically low levels, and the Chancellor having recently announced additional measures to support employment and boost demand during the winter months, housing market activity seems likely to strengthen further in the period immediately ahead.”
Richard Donnell, research and insight director at Zoopla, added: “Housing market conditions remain strong as new restrictions are introduced to control the spread of COVID.
“These changes are likely to continue to support housing demand in the near term as the importance of the home grows.
“However, the housing market will not remain immune to the impacts of weaker economic growth and rising unemployment.
“A change in the mix of buyers is supporting market conditions with sustained demand from equity rich existing owners seeking more space and a change in location.
“In contrast, first-time buyer demand is weakening. FTBs have been a driving force of housing sales over the last decade.
“They remain a key buyer group but lower availability of higher loan to value mortgages and increased movement by existing home-owners means a shift in the mix of home buyers into 2021.”