05 February 2020
Zoopla’s latest UK Cities House Price Index shows that buyer demand has risen across the UK’s 20 biggest cities, causing some to claim that we are in the midst of a “Boris Bounce”.
In examining the four-week period from 23 December 2019 to 19 January 2020, the data found that the level of housing demand has increased by an impressive 26% when compared with the same period in 2017/18 and 2018/19.
19 out of 20 of the UK’s major cities experienced a recorded increase in buyer demand. The only exception was in Belfast, where demand remained static. The highest spikes were seen in the North-East of England, with Sheffield, Leeds and Leicester experiencing an increase in levels of demand in excess of 26%. In what appears to be a continuing trend, these areas outperformed the traditionally more active and lucrative markets in the South of England, largely due to the South’s prohibitive pricing.
Where Scotland is concerned, it is interesting to note that Aberdeen has also experienced an above-average increase in market demand, even while average house prices continue to fall. Glasgow’s demand increase came in at just under the average, whilst Edinburgh – whose market has been buoyant and where prices have recently risen faster than those in any other city – saw the smallest increase in demand across the period.
Many commentators believe that a key reason for this increased market demand can be attributed to Boris Johnson’s decisive election win in December and his firm stance on Brexit. Zoopla’s research and insight director, Richard Donnell, cites “fading political uncertainty” as a motivator for those who were “holding off moving” to return to the market. Similarly, Rightmove’s market expert, Miles Shipside, is of the opinion that the increased number of potential purchasers represents a “release of…pent-up demand” which had accrued during the three-and-a-half-year period since the EU referendum. He believes we are in for an “active spring market”.
However, there are those who are less optimistic about the permanency of this increase in demand. Hansen Lu at Capital Economics believes it is highly questionable as to whether “any pickup at the start of the year will be sustained”. He is of the view that examining the increase in demand in isolation could paint a false picture of the future health of UK’s national and regional property markets. For instance, increase in demand can cause issues where it outstrips supply, potentially leading to increasing housing costs and pricing certain buyers out of the market. Additionally, whilst some certainty has been injected into the economy by the new Government, there are still many political and economic hurdles to be faced. Robert Gardiner, chief economist for Nationwide, explains that “much will continue to depend on how quickly uncertainty about the UK’s future trading relationship lifts”. We may be in for future market volatility as Brexit continues to unfold.
Zoopla statistics bear a warning to not focus on the upsurge in demand at the expense of other market variables. They show that it is not just high demand that makes for a successful, profitable or sustainable property market.
The report makes predictions as to the cities with the best market prospects for 2020 by looking at factors such as housing affordability, availability and time to sell, not just levels of demand. Nottingham came out on top, followed by Edinburgh and Glasgow. Of these top three cities, Nottingham is the only one with an above average increase in demand. In contrast, Aberdeen with its above average increase in demand comes in at the bottom of the list for market prospects.
The figures clearly show that political uncertainty does not herald market stagnation in all circumstances. It is useful to view our very own Edinburgh as a case study. Demand in Edinburgh has been strong over the course of a politically turbulent 2019, as evidenced by the 6.1% annual growth in prices. In August 2019, Edinburgh was also reported to be the fastest place for sellers to find a buyer. Zoopla’s report also highlights that, whilst demand has increased over the examined four-week period coming in to 2020, this level of increase actually represents a fall in the rate of rising demand in the first four weeks of the year when compared with the last two years. It is therefore arguable that Edinburgh has not really felt the full effects of the “Boris Bounce”, nor has it required it for its recent market success.
It is hard to disagree that political and economic stability will help drive the UK’s property markets forward, and it does appear that the current political climate has played a role in increasing buyer demand. However, we must be careful not to take these headline statistics as overall indicators of market health or performance. In assessing whether these increased levels of demand will continue or lead to high performing markets, we must consider all other pertinent variables. We must also not lose sight of the differences between the UK’s property markets, and examine market trends in their regional contexts.
Trainee SolicitorEmily Deans