New agreed house sales are running 28% above pre-lockdown levels as the recent surge in property demand converts into sales, the latest Zoopla House Price Index has suggested.

The property expert said the market suspension resulting from COVID-19 had reduced the flow of new supply and sales agreed by 90%.

While these measures are now rising ahead of their pre-pandemic levels, the increase in sales and supply since the start of the year is lagging 20% behind compared to 2019.

By contrast, the Index also showed that demand for housing has rebounded strongly as pent-up demand returns to the market. In the last month, demand from buyers has been double that of the same period in 2019, and on a cumulative basis since January 2020, demand is running 25% higher than the same period in 2019 – despite the lockdown and market closure.

Zoopla stated that this is primarily “catch-up” demand for what was lost over lockdown and estimated that returning buyers account for 80% of levels that would have been expected over this period in 2020, had COVID-19 not struck.

Zoopla research and insight director, Richard Donnell, said: “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 to 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 to 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.”

Zoopla’s data also indicated that despite an overall decline in annual transactions, London enjoyed an immediate boost to sales agreed following the stamp duty holiday recently announced by the Government. New sales agreed have increased by over a quarter (27%) in just two weeks in London, which was geared to benefit most from the changes.

The Index revealed that the boost to transaction volumes has not been replicated in other regions, however, where average property prices are lower and less responsive to stamp duty amends. While stamp duty relief will support demand in higher value markets – on property priced up to £500,00 – across southern England, Zoopla said it is unlikely to sustain demand indefinitely into 2021.

“While the stamp duty cut should help rally demand in the short-term, we will need to address a more crucial issue over the long-term – supporting the growing numbers of borrowers who are not able to secure high-street lending once the pandemic subsides,” added Bluestone Mortgages managing director, Steve Seal.

“What’s discouraging is that being rejected for mainstream finance could become the new reality for many after the crisis, particularly for the huge numbers of people who have been financially impacted by COVID-19.

“Over the coming months, it will be key that specialist lenders prepare for this new reality while focusing on their short-term recovery. This will help ensure that underserved borrowers are properly supported in the years to come.”

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