The housing market may be facing a short boom but this is likely to be followed by another “bust”, according to a survey of surveyors.
While recent housing market data has pointed toward encouragement for homeowners and the industry, estate agents are not very optimistic as the economy wallows in a recession due to the coronavirus pandemic.
The numbers of buyers has grown strongly, according to the Royal Institution of Chartered Surveyors survey, with a net balance of 75% of estate reported an increase during the month.
A healthy number homes is also coming to market, with a balance of 59% of agents reporting an increase, suggesting the housing market is in a good place this summer.
This ties in with Google Trends data cited by some economists, which suggests the number of people visiting the three main property portals — Rightmove (LON:RMV), Zoopla and OnTheMarket (LON:OTMP) — exceeded January’s level by 21% in the first 12 days of August.
The market was given a boost when Chancellor Rishi Sunak last month temporarily raised the stamp duty threshold to £500,000 to boost activity in the housing market after the lockdown.
But RICS reported its members are worried about the economic outlook, with unemployment rising and expected to grow sharply as the government furlough scheme comes to an end in the autumn.
Just over a quarter of surveyor expect housing transactions to continue to pick in the coming months.
And this proportion dropped to minus-10% when agents made their projections for the year ahead, while a balance of just 8% of surveyors believes prices will be higher in 12 months’ time than today.
“It is interesting that there remains rather more caution about the medium-term outlook, with the macro environment, job losses and the ending or tapering of government support measures for the sector expected to take their toll,” said RICS chief economist Simon Rubinsohn.
“Significantly, some contributors are now even referencing the possibility of a boom followed by a bust.”
This follows a report from Halifax that a housing marked “mini boom” had pushed average values up 1.6% month-on-month in July — the first increase in prices reported by the bank in five months.
The Office for Budget Responsibility recently warned that house prices could fall by 21% by the third quarter of 2021.
Economist Samuel Tombs at Pantheon Macroeconomics reckoned the fall from peak to trough was only going to be around 3% by next summer.
“Prices are defying gravity for now because few homes are on the market,” Tombs said, pointing to an average of just 41 properties per estate agent in July, well below the 55 average of the 2010s.
“Nonetheless, distressed sales have been contained because the Coronavirus Job Retention Scheme has protected temporarily the income of surplus workers, while struggling borrowers have easily obtained payment holidays, which can last for up to six months.
“By the winter, however, this policy support will have rolled off and the current imbalance between demand and supply will unwind.”
Shares in companies in the residential property market were mixed on Thursday, with some estate agency stocks higher, such as Purplebricks (LON:PURP) and OnTheMarket, while Rightmove was flat, and similar for housebuilders, with Persimmon (LON:PSN) and Bellway (LON:BWY) in the green, while the likes of Berkeley (LON:BKG) and Taylor Wimpey (LON:TW.) were near flat.