The property market, unlike the weather, is very hot right now.
When analysts start comparing anything housing related to the period immediately preceding the financial crisis, you can sense the fear amongst estate agents. The ones old enough to remember, at least.
If you’re a fan of David Attenborough (who isn’t) it’s kind of reminiscent of the way a group of Gazelles act when they can sense a Lion stalking them. Which is possibly the first time anyone has compared an estate agent to an antelope.
A return to pre-2008 levels, both in activity and prices.
Looking back, the years between 2004 and 2007 were pretty crazy. I was fresh out of University and new to an industry which at the time was dominated by buyers in financial services.
If you took a call from someone with a Goldman Sachs email address, it was usually only a couple of weeks before they were winning a best bids situation.
Given what followed next, it’s not a period anyone is excited by a possible return to. However that’s what we’re seeing, at least in terms of the property market.
According to data from Knight Frank, more money was spent on housing in England and Wales in the year to March 2021 than in any twelve month period since before the global financial crisis.
The year to March 2021 saw £274.8 billion spent, with March alone registering £42.8 billion, the highest monthly amount since records began in 1995. By comparison, the figure for the year to August 2007 was £278.9 billion.
Zoopla are predicting that by the end of this year, over 1.5 million properties will have changed hands, representing a 45% increase on 2020 levels, and one of the ten busiest years since 1959.
It’s not just transactions levels which have seen an increase. One in three (32%) properties sold for more than their original asking price in April, according to the latest Propertymark Housing Report. That’s the highest level on record.
In the week ending 7th May, applicants registering to buy with Savills were 185% up on the same period the year before, and nearly treble the levels since before the first lockdown.
Same same, but different
In the period running up to the financial crisis many markets were starting to look like bubbles. The fallout, predicated by the subprime mortgage crisis in the US, was pretty catastrophic and felt across the world. Everyone and everything seemed to be massively overleveraged.
However it’s important to remember that 2020 was a recessionary period, not a bull market. It was the first time in modern history that both house prices and activity increased against this backdrop.
A closer examination of the causes of this 2020/21 activity show that different driving forces are at play this time around.
The effect of the pandemic
Home has become one of, if not the most important personal commodity in a post pandemic world. Cars, clothing, holidays and other forms of discretionary spending were of no use to anyone when everyone was stuck at home.
The renewed focus on what the spaces we call home do for us in both practical and emotional ways became more important than ever before.
Similarly, the world of work has changed, possibly forever, and many homebuyers no longer rank being close to their place of work as a priority.
These trends are reflected in the statistics, with an increased demand for houses over apartments, and areas outside of the capital over London.
A short term spike?
There is very little doubt that a number of short term factors have contributed to what otherwise might be called a bubble, and it’s likely that some of these will subside in the second half of the year.
Stamp duty incentives, government backed 5% mortgage deposits and the tightest housing supply in recent memory are either coming to an end, or likely to be temporary.
Arguably, it’s the latter point which has affected the market the most. Empty nesters hold a great deal of the housing value in the UK, and also happen to be the demographic most at risk from Covid 19.
Their reluctance to market their homes, (which mostly involves strangers walking around your house) has been understandable.
As we move towards a new normal and with the majority of this age group having had both vaccine doses, I expect that an increase in supply will follow suit.
In line with this, Cluttons are predicting a slowdown in the second half of the year and into 2022. A return to previous Stamp Duty levels, the end of the furlough scheme and a lesser focus on housing will all potentially lead to reduced demand.
As always, time will tell.
Data compiled from Prime Resi, Zoopla, Savills, Knight Frank, Propertymark and Cluttons
Things I’ve been inspired by this week
If you happened to have read my blog on personal branding, social media and estate agency, you’ll know that I trend towards skeptical regarding the ways in which estate agents seek to share their expertise with the world.
However, that’s not to say that self promotion isn’t important. Apparently, success at work depends on being seen as both competent and likeable. How to find the balance? I found this article in the Harvard Business Review really helpful.
“Humility is admirable. But if someone requests information or an answer that requires you to reveal positives about yourself, you should oblige”