MARKET INSIGHT WINTER 2021 MOVING ON - Hamptons
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MARKET INSIGHT WINTER 2021 MOVING ON
MARKET INSIGHT
1
ECONOMY 2–3
Coronanomics
2
FOCUS 4–7
Lessons from 2020
3
MARKET METRICS 8–9
Time to sell and asking to achieved hit
record levels in late 2020.
4
LETTINGS 10 – 11
Signs of recovery
5
SALES 12 – 13
Help to Buy price caps
Aneisha Beveridge
Head of Research
beveridgea@hamptons.co.uk
6
Alison Blease
Head of Research PR
bleasea@hamptons.co.uk FOCUS SPECIAL 14 – 16
David Fell Looking to the year ahead
Senior Analyst
felld@hamptons.co.uk
@ Hamptons 2021 purpose of general information and Hamptons accept no responsibility for
any loss or damage that results from the use of content contained therein, including any errors or
negligence from third party information providers. It is your sole responsibility to independently check
and verify the facts contained within this report. All opinions and forecasts within this report do not in
any way represent investment or other advice. Reproduction of this report in whole or in part is not
allowed without the prior written consent of Hamptons.
1WINTER 2021 MARKET INSIGHT
ECONOMY
CORONANOMICS
UNEMPLOYMENT RATE (%) REDUNDANCIES (THOUSANDS)
Expect considerable focus in 2021 on hospitality and retail sectors have made Source: ONS Source: ONS
the pandemic’s impact on employment. the largest job cuts. Other employers are
Already it is apparent what types of reluctant to hire amid the uncertainty.
jobs and locations could be hardest hit,
12% 350
with city centres likely to bear the brunt. London has been at the centre of the
London, usually the powerhouse of crisis: a large proportion of employment 10% 300
the economy, seems set to be the most depends on retail and hospitality. A 250
affected region. higher proportion of workers in the 8%
capital have been furloughed than in 200
6%
The outlook may be downbeat, but pay other areas; there has been a sharper 150
is predicted to go up, with the Office of drop in job vacancies and a jump in 4% 100
Budget Responsibility (OBR) forecasting work-related benefit claims.
an average increase of 2.1% this year. 2% 50
1971 1980 1990 2000 2010 2020 2006 2008 2010 2012 2014 2016 2018 2020
Despite these conditions, average total
The OBR is also predicting that pay (including bonuses) still went up by
unemployment will peak at 7.5% in 2.7% in the three months to the end of
the second quarter of 2021– which October 2020. Earnings in the public
would represent a sharp rise on the sector showed the highest growth. EARNINGS GROWTH (%) CHANGE IN CLAIMANT
third quarter of 2020. At that time the But earnings fell in several sectors:
Source: ONS COUNT (OCT 19 V OCT 20)
unemployment rate was already moving construction, hotels, manufacturing,
upwards, reaching 4.9%, against 3.7% in restaurants, retail and wholesaling.
Source: ONS
the same period of 2019. This equates 8% 5%
to 1.69 million people, an increase of The furlough scheme played a key 6%
411,000 over the 12-month period. role in supporting earnings in 2020. 4%
4%
It is expected to help cushion the
More timely numbers underline the employment market until the roll-out 2% 3%
growing size of the problem. HMRC of vaccines start to provide population 0
2%
data, for example, revealed that there immunity. -2%
were 819,000 fewer people on payrolls -4% 1%
in November than at the start of the -6%
pandemic. During the third quarter, 2006 2008 2010 2012 2014 2016 2018 2020 0
Wales
London
Glasgow
Bristol
Brighton
Scotland
Liverpool
Birmingham
Manchester
North West
South East
North East
South West
West Midlands
East Midlands
Yorks & Humber
East of England
Northern Ireland
redundancies soared to a record high
of 314,000, an increase of 181,000 on Earnings Growth Real Earnings growth
the previous quarter. QUICK FACTS
The extension of the furlough scheme 819,000
until 30th April 2021 has softened the
fewer people on payrolls in
blow somewhat, but more businesses November than at the start of
have announced redundancies. The pain the pandemic
is not being equally felt: the aviation,
2 3WINTER 2021 MARKET INSIGHT
FOCUS
LESSONS FROM 2020 ANNUAL CHANGE IN SELLER PROFIT
Source: Hamptons and Land Registry
What lies ahead for the property East, the East of England and the South
market after the extraordinary events West, as a North-South divide opened
of 2020? After the pandemic freeze, up. But the principal source of demand
the market re-opened to a clamour of came from those with a home to sell.
demand for relocation that defied all In November, there was a 96% jump in
expectations. Households, with the such house hunters in the South East.
wherewithal to move, wanted larger Interest from first-time buyers and
£12,000
houses with big gardens and ample people seeking a second home slowed.
space for home working, either in a Could this be the pattern of 2021?
leafy suburb or the country.
£10,000
CASH PURCHASES
This relocation frenzy was fuelled further The share of homes bought by cash
by the stamp duty holiday and cheap buyers fell to near-record lows, despite
£8,000
mortgage deals for borrowers with the rock-bottom rates on deposit
plenty of equity. The key statistics of accounts. This shift is partly explained
2020 hint at some of the trends that by the lack of downsizers, some of
£6,000
could continue into 2021, despite the whom may have been shielding. In the
challenges facing the residential sector. third quarter of 2020, cash buyers
accounted for 24% of sales, against
£4,000
BUYER TYPES 26% in the same period of 2019. Just
Buyer numbers, based on registrations 17% of London homes were bought
with estate agents, were slowing by a cash buyer in the final quarter of
£2,000
towards the end of 2020, although they the year, the lowest figure on record.
were still above their 2019 levels. In The proportion of £1 million-plus
November 2020, buyer registrations homes bought by cash buyers tumbled
£0
were 12% higher than in the same to 20% in the third quarter of 2020
month of 2019. The pace of growth in – again the lowest ever - down from
registrations was fastest in the South 33% in the same quarter of 2019.
-£2,000
-£4,000
“In the third quarter of 2020, the
average gross profit made on a home, -£6,000
bought within the previous 20 years, London West
Midlands
South
East
East
Midlands
North
West
Wales North
East
Yorks &
Humber
South
West
East England
& Wales
was £85,620, up from £83,240 in the
same period of 2019”
House Flat
4 5WINTER 2021
FOCUS
LESSONS FROM 2020
There was slightly more enthusiasm to the countryside moved by an average
buy a home of between £750,000 and of 7.6 miles. London families leaving the
£1 million with cash. Perhaps the buyers bright lights want a home in a tranquil
of these homes were more motivated by rural setting. But they are now willing to
the stamp duty holiday? consider a rather more remote location.
The average moving distance for a city-
SELLER PROFIT dweller heading to the countryside grew
In the third quarter of 2020, the to 21.9 miles by the end of the year,
average gross profit made on a home, against 18.6 miles at the start of 2020.
bought within the previous 20 years,
was £85,620, up from £83,240 in the EXCHANGE TIMES
same period of 2019. In August and Exchange times were lengthening for
September, the average gross profit buyers in all locations at the beginning of
rose to £90,000-plus, due to families 2020. By July, thanks to delays caused
with larger homes making moves. Their by pent-up demand during the market’s
allure overshadowed flats: the average closure, the time between an offer and
detached house that changed hands in exchange hit an average of 143 days.
the third quarter of 2020 sold for 49% Conditions improved in subsequent
more than its original purchase price. months. But, by October, the time
The average flat sold for 29% more between an offer and an exchange
although it has been owned for a shorter was more than 100 days in all parts
period of time. of the North and the Midlands. Delays
in the processing of loan applications
MOVING DISTANCE and conveyancing bottlenecks explain
The most highly-publicised trend of this trend. Lenders are becoming
2020 was the move to the country. The more cautious as buyers race to beat
average buyer moved 4.7 miles, slightly the March 31 stamp duty holiday
farther than in 2019 when the average withdrawal deadline. This is set to be
was 4.2 miles. Households relocating in one of the key dates of 2021.
MOVING DISTANCE QUICK FACTS
Source: Hamptons
20%
Move Ave. Distance Annual Change
Within cities 1.7 miles +0.3 miles
City to town/suburbs 8.1 miles +0.1 miles The proportion of seven figure
City to Country 16.7 miles +3.9 miles sales bought in cash, the lowest
figure on record.
6WINTER 2021 MARKET INSIGHT
MARKET METRICS
TOP 2020 AVERAGE SELLER GAIN TOP 2020 INCREASES IN AVERAGE
IN ENGLAND AND WALES SELLER GAIN IN ENGLAND AND WALES
DAYS TO SELL Source: Hamptons and Land Registry Source: Hamptons and Land Registry
Source: Hamptons
200 Region 2020 Change from Region 2020 seller Change from
London GB seller gain 2019 gain 2019
150 Kensington and Chelsea £580,340 (£28,810) Islington £292,150 £61,670
City of Westminster £452,450 £35,790 City of Westminster £452,450 £35,790
Days
100
Islington £292,150 £61,670 Waverley £178,840 £35,080
50 Hammersmith and Fulham £283,860 £5,860 Hounslow £183,560 £23,740
Richmond upon Thames £278,730 £15,640 Wandsworth £256,040 £21,080
0
Jan-16 Jan-17 Jan-18 Jan-19 Nov-20 Camden £265,880 (£65,090) Surrey Heath £139,860 £15,980
Jan-20
Wandsworth £256,040 £21,080 Richmond upon Thames £278,730 £15,640
Brent £221,500 £13,460 Derbyshire Dales £80,910 £14,820
Haringey £218,740 (£18,110) Brent £221,500 £13,460
SHARE OF INITIAL ASKING PRICE ACHIEVED Hackney £215,970 (£8,090) Hart £128,790 £12,940
Source: Hamptons
100%
99%
98%
97%
96%
AVERAGE 2020
95%
Jan-16 Jan-17 Jan-18 Jan-19 Jan-20 Nov-20
SELLER GAIN
Source: Hamptons International
and Land Registry
SALES AGREED IN DECEMBER 2019
Source: Hamptons Over £100,000
£75,000 - £100,000
£50,000 - £75,000
Most of the sales agreed in December £40,000 - £50,000
2020 will go on to complete before the Did not complete by Under £40,000
end of the stamp duty holiday, despite 31st March 2020
lender’s and conveyancer’s workloads. Did complete by
61% of sales which were agreed in 31st March 2020
December 2019 went on to complete
before the end of March 2020.
8 9WINTER 2021 MARKET INSIGHT
LETTINGS
SIGNS OF RECOVERY
ANNUAL RENTAL GROWTH
Source: Hamptons
The downbeat mood in the lettings students. These groups stayed
market in 2020 was in marked contrast away as a result of travel bans.
to the excitement in sales. The average
rent remained unchanged between the Many of these short-let properties
start of the first lockdown in March came onto the long-term market, 12%
and September, but October marked exacerbating the excess supply issue.
a turning point when rents in Great But rents in outer London have been
10%
Britain began to rise again. And by more immune from these challenges.
November the rate of growth had Rents in London’s suburbs rose by
picked up. 3.8% in November, exceeding pre- 8%
pandemic levels. This meant that it
But this average figure masks was 21% more expensive to rent in 6%
variations in the performance of the inner London than in Outer London
regions, with London lagging behind in October, compared to 44% more
4%
the rest due to a realm of factors the previous year. We expect the slide
unique to the capitals rental market. in inner London rents to continue in
early 2021 before levelling off. 2%
Nationally rents rose 3.0% in November,
twice the rate of increase recorded in At the end of summer 2020, we forecast 0
October. Rents in both the South West that the average rent would fall by 1%
and North led the way, rising by 8.1% during the year, given the pandemic chill
-2%
and 6.5% year-on-year in October that descended on much of the market
respectively, thanks to a shortage following the initial lockdown. But this
of properties. Renters’ incomes in may turn out to be an underestimate. -4%
these regions were supported by the In fact, the rental market is showing
furlough scheme and other Government signs of recovery, driven by households -6%
stimulus schemes. Rural rents increased whose finances haven’t been
at a faster rate than those in cities, affected by the economic crisis.
-8%
illustrating that tenants were keen to
move to the country - like homebuyers. For 2021, we are forecasting an 2014 2015 2016 2017 2018 2019 2020
average decline of 1% in rents
Households moving out of town, because, despite the arrival of the London GB
seeking extra space for home working Covid-19 vaccines, we argue that
and gardens, helped produce the the full impact of the virus on the
glut of homes that drove down rents economy will not be felt until 2021.
in London in 2020. There was also a We forecast that rents will drop by 3% London Great Britain
slump in demand for the apartments in London. But the pace of decrease
and houses that would normally be could slow, as the economy recovers
let on a short-term basis to overseas and more people are vaccinated
executives, tourists and international enabling them to travel again.
10 11WINTER 2021 MARKET INSIGHT
NEW HOMES QUALIFYING FOR
NEW HELP TO BUY PRICE CAP
Source: Hamptons SALES
HELP TO BUY PRICE CAPS
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Help to Buy, the government Equity Yet, although many homes will be above
1 bedroom
2 bedroom Loan scheme that covers new-build the price caps, we expect that Help to
London 3 bedroom homes in England, is to be restricted this Buy will still be in demand, attracting
4 bedroom
5 bedroom year, ahead of its planned abolition in more first-time buyers than in 2020.
1 bedroom 2023. But we are forecasting that this
South 2
3
bedroom
bedroom
may not limit the popularity of this aid Why do we reach this conclusion?
East 4 bedroom package which was launched in 2013. Lenders will still be severely rationing
5 bedroom
the supply of the 90% loan-to-value
1 bedroom
From April 1, Help to Buy will only be (LTV) deals that many first-time buyers
South 2 bedroom
3 bedroom available to first-time buyers. Regional require. This means that, for many, Help
West 4 bedroom
price caps will also be introduced, set to Buy may be the only way to climb
5 bedroom
1 bedroom at 1.5 times the average price paid onto the ladder. Under the terms of the
East of 2 bedroom by first-time buyers in that region. As scheme, applicants must have a 5%
3 bedroom
England 4 bedroom a consequence of this measure, as deposit. But since they can secure a 20%
5 bedroom many as 45% of new homes that were government loan (40% in London) which
1 bedroom marketed in 2020 would no longer be is interest-free for five years, they have
East 2 bedroom
eligible for the scheme because their access to a wider choice of mortgages.
3 bedroom
Midlands 4 bedroom values were above the caps.
5 bedroom
As a result of the price caps, we forecast
1 bedroom
West 2 bedroom Our calculations show that 93% of that a two-tier new-build market will
3 bedroom five-bedroom homes and 82% of four- emerge this year, with 50-80% of one
Midlands 4 bedroom
5 bedroom bedroom homes marketed would not and two-bedroom homes in every region
1 bedroom qualify, although, of course, fewer such being sold with Help to Buy. Just 10-
North 2
3
bedroom
bedroom
properties are bought with Help to Buy. 20% of properties with more than three
East 4 bedroom bedrooms will be sold using the scheme.
5 bedroom
But some of the smaller properties,
1 bedroom
North 2 bedroom popular with first-time buyers, would
3 bedroom also be excluded, with 40% of three
West 4 bedroom QUICK FACTS
5 bedroom bedroom homes, 26% of two-bedroom
1 bedroom homes and 11% of one-bedroom homes
Yorkshire 2 bedroom being priced above the cap. As our
& Humber
3
4
5
bedroom
bedroom
bedroom
graph illustrates, some of the cheaper 43%
northern markets seem set to be hard hit of the new homes marketed in
by these changes. 2020 will not qualify for Help to
Post April 2021 Price Cap Currently Buy from April 2021
Post April 2021 Price Cap Currently
12 13WINTER 2021
FOCUS SPECIAL
LOOKING TO THE YEAR AHEAD
By Aneisha Beveridge, Head of Research
In January, the question that almost What would be the result if Rishi Sunak,
everyone will ask me is: “So, what’s the chancellor, opted to keep the stamp
going to happen to house prices?” But duty holiday in place until the end of
this year, I am also preparing to hear: year? Such a decision would be welcome
“Do you think it’s possible that the news for the buyers who may narrowly
stamp duty holiday will be extended miss the deadline as the result of legal
beyond March 31st” and other delays that have been causing
some deals to stall.
In answer to the first question, we will
as we always do throughout the year, In the event of a change of heart
be keeping a close eye on the housing on the part of Chancellor Sunak, we
market and how any changes might would expect slightly stronger house
impact our forecasts, which we put price growth, particularly in London
together in September 2020. Back then and the South. First-time buyers and
we explained that the average price is second-steppers in more expensive
likely to remain flat in 2021, with small parts of the country in particular
falls in some areas. This assessment was would be able to contemplate a
based on the agreement of a Brexit deal, purchase thanks to the tax savings
but also on the arrival of vaccines early in and hopefully a return in higher loan-
2021 and the ending of the stamp duty to-value mortgages as the economy
holiday as planned in March. recovers towards the end of the year.
The market seems set to pause for breath We also think that around 10%, or
after 2020, an extraordinary year when 100,000, more homes could be sold,
as many as one million homes are likely returning transaction numbers to their
to have been sold. This was despite the 2016 levels. But economic weakness and
economic ravages of the pandemic and mortgage rationing will still serve to keep
the temporary closure of the market. a cap on the numbers.
“The market seems set to pause for QUICK FACTS
breath after 2020, an extraordinary
year when as many as one million
homes are likely to have been sold” 100,000
The projected number of extra
sales in 2021 if the stamp duty
holiday is extended.
14WINTER
SPRING 2020
2021
If Sunak does not relent, and the overall growth for the year would be 2%.
stamp duty holiday ends, as currently We now expect that the final figure may
planned, its removal will also coincide be higher, given that the demand for
with a number of other key deadlines. relocation continued almost unabated to
The furlough scheme is also due to the end of the year.
be withdrawn at the end of April
and unemployment is expected This demand was immediately evident
to peak thereafter. These factors in May when the market re-opened. The
will, obviously, weaken sentiment first lockdown, which lasted seven long
and activity in the market. weeks, had forced people to consider
what they really wanted from a home.
However, the arrival of the vaccines Most concluded that they wanted more
should aid the recovery – and, for space for home working and a larger
the second half of 2021, we are garden. Some immediately acted to
forecasting an economic pick-up achieve that goal. Others who were
and more availability of higher planning to move sometime in the future
loan-to-value mortgages. started viewing potential properties when
the stamp duty holiday was announced.
In the prime markets, the fate of the
stamp duty holiday will be less of a However, not everyone was able to start
concern since the tax savings make the search for more space given the
up a smaller share of the typical economic uncertainty. Therefore the
property’s price. Also, the affluent are arrival of a vaccine does not necessarily
eligible for the best mortgage deals mean the end of this trend. In 2020,
because they have cash or equity. the market was driven by wealthy
homeowners whose jobs were largely
Even if travel restrictions are unaffected by the economic crisis.
loosened, international buyers face
the introduction of the 2% surcharge First-time buyers and second-steppers
in April. But this extra tax may be were held back by unemployment fears
counteracted by sterling’s weakness, and the rationing of high loan-to-value
which will continue to make UK property mortgages. In 2021 all eyes will be on
appear an attractive proposition. Chancellor Sunak’s policies for jobs, and
also on the progress towards those 95%
Whatever unfolds in 2021, we will still state-backed loans promised by the
be talking about what happened in the Prime Minister.
market in 2020. Last September, two
months after the surprise announcement But if we’ve learnt anything from 2020,
of the stamp holiday, we forecast that it’s to expect the unexpected.
“If Sunak does not relent, and the stamp
duty holiday ends, as currently planned,
its removal will also coincide with a
number of other key deadlines.”
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