Last week, our company listed a standard two-bedroom semi-detached property with an estate agent.
We set an optimistic asking price, but still had 33 viewings and nine offers over the first weekend.
It’s clearly a sellers’ market. And yet it’s not really a natural situation. Because despite the pandemic demand has been stoked by people’s changing priorities.
Whether it’s a first-time buyer looking to get out of a congested house share, a young family looking for more outside space or a professional who needs a proper home office many people are looking for a change.
And there are lots of home buyers who are positive about the future and have found their incomes unaffected or even improved through the crisis.
At the same time, we have seen limited stock coming to the market and last week Home.co.uk suggested that supply has reduced by a quarter compared to 2019.
This is because many homeowners are unsure about the future, while others may be concerned about allowing access to their property during a pandemic.
But it’s also important to look at what usually drives homeowners to put their property on the market.
In ‘normal’ circumstances, many homeowners will only sell when they see something they want to buy.
Stock levels were driven to an unnatural low by the pandemic, which means there isn’t enough stock available to encourage more people into the market.
What we are seeing is that the normal mechanisms of supply and demand are not working in the current market.
Record high prices should be encouraging homeowners to join the market, chasing that high sales price.
But, despite massive house price increases, we’re not seeing that and historically low volumes of supply coupled with high demand is resulting in the price increases we are seeing.
How will this end?
The boom can’t continue indefinitely. We’ll soon see double digit annual price growth at a time when average salaries are stagnant, which isn’t sustainable.
As lockdown restrictions end, and levels of uncertainty subside, we will see an increasing volume of property coming to the market. As stock increases, buyers will have more choice and less competition so price inflation will subside.
We’ll also see the stamp duty holiday wind down and, once the race to beat it has stopped, demand will fall. The hope is that these steps will lead to a gradual reduction in price inflation, until we reach a more balanced position.
Elephants in the room
But, as the country is weaned off life-support, we do have some big elephants in the room.
Once furlough ends, we may see unemployment rise. Unemployed homeowners will be motivated to sell quickly, which will depress house prices.
If new jobs aren’t created fast enough, we may see income inflation stall for several years. If this hapens, there will not be the cash to drive house price inflation.
The other issue is that, through Covid and Brexit, the economy undergone a huge restructuring and the effects of that have not yet played out.
As the government’s emergency efforts are withdrawn, the economy will gradually settle down to the ‘new norm’.
Overall, people are desperate to get on with their lives and optimism will win through. This should help us through this difficult period.
Danny Luke is MD of Quick Move Now