Coronavirus: Zoopla predicts summer house price leap

Tom Belger
Finance and policy reporter
Homes in Leeds, where sales have spiked. Photo: Rahman Hassani/SOPA Images/LightRocket via Getty Images

Zoopla is predicting UK property prices will continue to rise over the next three months, despite the economic fallout of the coronavirus crisis.

Analysts at the leading property site expect house price growth of 2% year-on-year over the next three months.

It reflects surging demand since the UK government eased coronavirus restrictions on home moves in England last month, with both pre-virus transactions and new interest in moving fuelling the market. An easing of restrictions has been subsequently announced in Scotland, Wales and Northern Ireland.

Zoopla analysis of website visits suggests demand is some 46% higher than in early March before the government warned against non-essential sales and home moves. It has not been matched by a similar surge in supply, down 7% on a year ago.

READ MORE: Coronavirus costs Rightmove up to £95m despite 10% leap in sales

Asking prices for sold properties in the first two weeks of June are now 7% up year-on-year, a similar growth rate to the first few months of the year before the pandemic struck. Property activity had previously been booming since the Conservatives’ election victory in December.

Many analysts have predicted a sharp decline in property prices this year, as the economy reels from the pandemic and lockdown.

A Reuters poll of 21 property market analysts on Tuesday found average forecasts of a 5% drop this year, with prices only set to recover by the end of 2022. Most said high unemployment would weigh down activity, and analysts said a ‘worst-case scenario’ would see a much steeper 11% drop this year.

Zoopla forecasts do predict an eventual decline in property prices, but their latest report suggests the current spike in demand will delay them “towards the end of 2020.”

READ MORE: House prices jump in England as estate agents overwhelmed

“After an initial rebound, we expect demand to weaken over the summer months as the economic impact of COVID starts to materialise,” said Zoopla’s report.

It highlighted likely growth in unemployment, lender caution and more limited availability of mortgages with 10% deposits, often relied on by first-time buyers.

The pandemic has had a relatively limited impact on house and flat prices so far, despite the steepest economic downturn in decades.

Estate agents say would-be buyers have been left disappointed not to secure bigger bargains in recent months, with Rightmove reporting asking prices £6,000 higher in June than in March.

Bank of England analysis in May suggested UK property prices may drop 16% this year, as the economic fallout grows and government support is tapered off.

Temporary crisis measures may be sustaining demand and limiting forced sales, with one in six mortgages given a payment holiday and almost one in three workers furloughed on state-subsidised pay.

Zoopla’s research director Richard Donnell said in early June the spike in demand since restrictions were eased may prove “short-lived,” with Britain’s economic troubles likely to “feed through” into market sentiment later this year.