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July, 2020
Zoopla: Highest price growth for two years

House prices increased by 2.7% year on year to £219,500 in June, the highest annual growth figure for almost two years, according to Zoopla.

However, the monthly growth rate halved to 0.2%.

New sales agreed are 28% higher than pre-lockdown levels, but the market continues to play catch-up as levels for the year to date remain 20% lower than the same period in 2019.

Zoopla calculates that this amounts to 124,000 lost sales worth £27bn.

For 2020 as a whole, the property website expects sales to be 15% lower than last year as a result of the pandemic.

Zoopla predicts annual growth will remain between 2% and 3% for the rest of the year.

There has been a sharp pick-up in activity since the stamp duty announcement with sales in London up by 27% over the last two weeks, although regional housing markets across England have not benefited to the same degree.

Lockdown has created an imbalance in supply and demand which is most acute in northern cities such as Sheffield, Liverpool and Manchester where house price growth is above average.

Nottingham saw the strongest annual house price growth, up by 4.5% to £158,800, followed by Manchester where prices rose by 4.1% to £174,500.

Leeds and Leicester both saw annual growth above 3%.

At the other end of the scale, Aberdeen was the only city to see prices fall, with a decline of 2.4% year on year to £143,300.

Zoopla says that talk of a flight from urban areas following lockdown has been overstated.

It says that while research suggests that Covid boosted demand for homes outside major cities Zoopla expects this to be a one-off factor rather than a long-term seismic shift in consumer attitudes.

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

Zoopla says that as post-lockdown buyers look for a garden but also seek a short commute, they are likely to seek homes slightly further out instead of within inner London.

Zoopla says there is likely to be some rebalancing in between demand for homes in higher density areas of cities and their suburbs.

Research and insight director Richard Donnell says: “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 12-18 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 sizable 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 3-6 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.”