The coronavirus prompted UK households re-evaluate their housing needs, meaning demand for family houses with gardens, parking and extra space to work from home rose.
Overall, the pandemic saw a 40% boost in housing demand across 2020 when compared to 2019, according to Zoopla’s House Price Index.
Demand was up despite the UK property market being closed for more than two month across England, Wales, Scotland, during the first lockdown period earlier this year.
While demand rose over 2020, the flow of new supply increased by just 4%. This has created a supply and demand imbalance and an upward pressure on house prices, the Index found.
This means that national house price growth is running at a three year high of 3.9% — the highest rate since August 2017 and up from just 1.3% a year ago. This three-month growth rate peaked at 2% in September and has since slowed, indicating that annual growth will plateau at approximately 5%.
Across the regions, the fastest house price growth was recorded in Manchester (5.7%) followed by Leeds, Nottingham and Liverpool all at over 5%. Affordability remains less of a barrier to house price growth in these cities compared to South England where house price growth was recorded at just 2.1% in Southampton and Oxford.
More activity at higher price points means the the monetary value of homes of homes selling is 26% higher than in 2019.
Zoopla says that the UK’s housing market is “ending 2020 strongly with more buyers looking for a home” than this time last year.
“More sales at higher prices have boosted the value of homes selling in 2020, led by a strong rebound in southern England,” Richard Donnell, director of research & insight at Zoopla, said.
There was also a correlation between between the volume and value of sales agreed across regions and countries. Higher average selling prices in the East of England and the South East have increased the value of homes sold in 2020 by 37% compared to last year.
This means an additional £62bn ($83.9bn) worth of sales were agreed in 2020 in comparison to last year, which will take the annual total of homes sold this year to over £300bn, Zoopla says.
The listings website believes the spike in sales agreed in 2020 is being created by a change in lifestyle aspirations driven by the COVID-19 pandemic along with, but to a lesser extent, the Stamp Duty holiday.
Meanwhile, the value of mortgage approvals for home purchases in October was up 68% on 2019 – resulting from sales agreed two to three months prior, at the peak of the rebound.
“Improved availability of higher loan-to-value mortgages for those with deposits of 10% or more are already increasing, which will support first-time buyers over the next 12 months,” Donnell said.
Donnell added: “Looking ahead to 2021 we expect house price growth to reach 5% by mid Q1 and then slow to +1% by the end of the year as demand starts to weaken over 2021 H2.
“The number of completed housing transactions will be buoyed by a strong Q1 with sales agreed over 2020 Q4 completing early next year. Overall, we expect the number of completed housing transactions to match 2020 levels at 1.1 million.”
Whilst the highest rates of price inflation are in regional housing markets, the greatest increase in sales agreed has been concentrated in the South East and East England in 2020, where sales agreed are up more than 20% on 2019. Nationally, sales agreed are up 9%.
Watch: What do stamp duty cuts mean for buyers and house prices?