Focus

Lessons from 2020

What lies ahead for the property market after the extraordinary events of 2020? After the pandemic freeze, the market re-opened to a clamour of demand for relocation that defied all expectations. Households, with the wherewithal to move, wanted larger houses with big gardens and ample space for home working, either in a leafy suburb or the country.

This relocation frenzy was fuelled further by the stamp duty holiday and cheap mortgage deals for borrowers with plenty of equity. The key statistics of 2020 hint at some of the trends that could continue into 2021, despite the challenges facing the residential sector.

BUYER TYPES

Buyer numbers, based on registrations with estate agents, were slowing towards the end of 2020, although they were still above their 2019 levels. In November 2020, buyer registrations were 12% higher than in the same month of 2019. The pace of growth in registrations was fastest in the South East, the East of England and the South West, as a North-South divide opened up. But the principal source of demand came from those with a home to sell. In November, there was a 96% jump in such house hunters in the South East. Interest from first-time buyers and people seeking a second home slowed. Could this be the pattern of 2021?

CASH PURCHASES

The share of homes bought by cash buyers fell to near-record lows, despite the rock-bottom rates on deposit accounts. This shift is partly explained by the lack of downsizers, some of whom may have been shielding. In the third quarter of 2020, cash buyers accounted for 24% of sales, against 26% in the same period of 2019. Just 17% of London homes were bought by a cash buyer in the final quarter of the year, the lowest figure on record. The proportion of £1 million-plus homes bought by cash buyers tumbled to 20% in the third quarter of 2020 – again the lowest ever - down from 33% in the same quarter of 2019. There was slightly more enthusiasm to buy a home of between £750,000 and £1 million with cash. Perhaps the buyers of these homes were more motivated by the stamp duty holiday?


SELLER PROFIT

In the third quarter of 2020, the average gross profit made on a home, bought within the previous 20 years, was £85,620, up from £83,240 in the same period of 2019. In August and September, the average gross profit rose to £90,000-plus, due to families with larger homes making moves. Their allure overshadowed flats: the average detached house that changed hands in the third quarter of 2020 sold for 49% more than its original purchase price. The average flat sold for 29% more although it has been owned for a shorter period of time.

MOVING DISTANCE

The most highly-publicised trend of 2020 was the move to the country. The average buyer moved 4.7 miles, slightly farther than in 2019 when the average was 4.2 miles. Households relocating in the countryside moved by an average of 7.6 miles. London families leaving the bright lights want a home in a tranquil rural setting. But they are now willing to consider a rather more remote location. The average moving distance for a citydweller heading to the countryside grew to 21.9 miles by the end of the year, against 18.6 miles at the start of 2020.

EXCHANGE TIMES

Exchange times were lengthening for buyers in all locations at the beginning of 2020. By July, thanks to delays caused by pent-up demand during the market’s closure, the time between an offer and exchange hit an average of 143 days. Conditions improved in subsequent months. But, by October, the time between an offer and an exchange was more than 100 days in all parts of the North and the Midlands. Delays in the processing of loan applications and conveyancing bottlenecks explain this trend. Lenders are becoming more cautious as buyers race to beat the March 31 stamp duty holiday withdrawal deadline. This is set to be one of the key dates of 2021.

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Of our Winter 2021 Market Insight