We’ve recently run a survey of users of our Property Guru platform and the results are a reality check on some of the strong positive sentiment that’s emerged lately about the housing market’s prospects. To be clear, we don’t think that the outlook is all doom and gloom. But at the same time, we’ve had the sense in the past few weeks that the effects on property from the recession and rising unemployment might have perhaps been temporarily overlooked.
On a wide range of measures, housing market activity has rebounded since we moved to alert level three in late April, with banks’ valuations ordering, real estate agents’ appraisals, and new listings for both sales and rent all bouncing back – albeit they’re still below last year’s levels on the rental side (see the first chart). New mortgage lending flows have also picked up a bit.
But while we’ve been wary of being unduly pessimistic about the economic and property market outlook, there’s a sense that some have now become too optimistic – after all, we’re in a recession and unemployment has further to rise yet. These factors will restrain the property market for the rest of 2020 at least.
So, to get a greater level of insight into what’s really happening ‘on the ground’ we’ve recently run a survey of users of our Property Guru platform, and the responses (mostly from estate agents) are an added reality check. First, when it comes to the reason why vendors have been listing recently, there were quite a few for the ‘wrong’ reasons. Indeed, as the second chart shows, 19% of respondents cited financial distress as the reason for listing, with 16% noting fears of price falls. Another 10% cited vendors wanting to sell an empty rental property. Of course, it wasn’t all bad – many vendors were listing because of wanting to upsize or downsize, or for other reasons such as a job relocation.
Meanwhile, survey respondents were a little mixed about whether the short-term prospects for buyer demand are better or worse than pre-COVID, with some believing it might be higher, but most either the same (26%) or lower (43%). Putting that subdued demand expectation alongside the still-tight supply of listings, it wasn’t a surprise that more than half of the survey respondents think actual sales volumes will be lower in 2020 than 2019. That squares with our own expectation that volumes could be down by 25% this year, to about 65,000 (see the third chart).
Then finally we asked for a view about property prices, and the responses here were also pretty downbeat. A handful of respondents think prices will rise this year, but 23% expect flat values, with the majority (63%) expecting falls either now or after a delayed response. In addition, about one-quarter of respondents think prices will drop by at least 10% this year, which is quite a downbeat view and a timely reminder that the economic issues we’re facing can’t be ignored.
All in all, it’s important to note that our survey was taken at one point in time (mid-June) and mostly covered one audience (i.e. real estate agents). However, the results are still a reality check and reaffirm our view that the property market isn’t out of the woods yet. Spring remains a key period to watch, as wage subsidies and mortgage payment deferrals potentially wind down, and the General Election in September possibly creates some extra uncertainty in the economy.