By Geoffrey Smith
Investing.com -- The U.K. housing market is enjoying a post-reopening bounce.
Investors in the U.K.’s biggest online real estate portal certainly seemed intent on enjoying it while it lasts on Friday, pushing the stock up nearly 8% to a five-month high in response to a quarterly report that showed house-hunters releasing their pent-up demand with abandon.
Since May 13, when the U.K. government announced the relaxation of lockdown measures that had stopped the crucial viewings process, Rightmove PLC (LON:RMV) has broken its own record for customer traffic on 65 days. Visits to the site in June were up 50% from a year earlier. For the months of June and July, demand for sales properties was up 50% from a year earlier, while demand for rental properties was up 20%.
Clearly, these are not figures that can be sustained forever. Some degree of mean reversion seems inevitable. Government employment subsidy schemes will expire and unemployment will rise. The holiday on stamp duty, which has acted as a defibrillator for a moribund market, will have to be put back in its holster one day, as Treasury chief Rishi Sunak implicitly acknowledged on Friday. Sunak said the U.K. can’t sustain the current level of borrowing indefinitely.
However, Rightmove gave a tantalizing glimpse of a brighter future even after the first wave of pent-up fades, as the pandemic triggers what could be a major long-term shift in consumer preferences, as people flee densely-populated big cities in search of the perceived safety and greater comfort of the suburbs. A structural shift to working from home increases the premium on living space that is actually liveable, after all.
The company said its data suggests “that the significant increase in activity is being driven not only from the pent up demand from the period of lock down, but an increased number of home hunters who have decided to move following the experience of lock down.”
If this trend establishes itself, then Rightmove can look forward to a structural support in transaction volumes that could cushion the longer-term hit from falling prices caused by an economic downturn whose duration and severity still can't be judged with any confidence.
The company may not even have to worry about an aggregate fall in prices, at least in nominal terms. While locals sell up in London to look for cheaper space further outside the capital, past evidence suggests that there will always be enough foreign buyers for London property to put a floor under prices there - especially if sterling cheapens (as the current mix of fiscal and monetary policy suggests it ought to).
The house price index compiled by Halifax, one of the country’s biggest mortgage lenders, broke a streak of four straight monthly declines with a 1.6% increase in July, the second-biggest rise in 17 months. On an annual basis, prices rose by 3.6%, the fastest clip since February.