The exceptional economic circumstances Covid-19 (Coronavirus) has created for the UK property market have been far-reaching and widespread. The early optimism of 2020 has ground to a halt with an unnerving jolt, reversing all the upward traction in house prices seen after the uncertainty surrounding Brexit in the market.
Despite the UK Government’s advice that ‘there is no need to pull out of transactions’, to date, there have been an estimated 373,000 property transactions paused during coronavirus lockdown, with a combined estimated value of £82bn.*
The latest Rightmove research published this week showed the average price of property coming to market this month dipped 0.2 per cent to £311,950. By contrast, in April last year, UK house prices increased 2.1 per cent.
Industry insiders have given further analysis and predictions**:
Impossible to predict the scale of blow “History tells us that house prices tend to fall when the economy shrinks as a result of falling output,” says Richard Donnell, research director at property platform Zoopla.“[This] has a knock-on impact on unemployment or higher borrowing costs – all things that can result in more ‘forced sellers’. Thus, the scale of the impact on house prices depends upon the scale of the economic implications of Covid-19.”
Estate agent Savills estimated that average UK house prices would fall between five per cent and 10 per cent in the short-term while the low transaction market caused by the coronavirus lockdown continues.
Howard Archer, chief economist at EY Item Club, forecast that UK house prices could drop between three per cent to five per cent in the second and third quarters of 2020.
Meanwhile, Knight Frank predicted that average UK house prices would dip three per cent this year, and property values in London will fall two per cent.
London estate agent Chesterton’s also estimated that house prices in the capital will fall two per cent in 2020 due to coronavirus.
Lloyds has predicted that it is likely that house prices will fall five per cent this year, before beginning to recover in 2021. In the most positive scenario, the bank modelled that house prices could dip 2.2 per cent this year before bouncing back next year. However, in its worst-case scenario, house prices would plummet ten per cent, with an aggregate decline of 30.2 per cent by 2022.
Capital Economics said it expects house price declines of about 5 per cent on average, rather than deep crashes. In a research note it said: “Unlike in previous downturns, residential property has not been the root cause this time. “Even so, house prices will not escape this recession unscathed. If policy support proves effective if lockdowns hamper property sales, and if demand rebounds later this year, house price crashes are unlikely.”
Despite the uncertainty surrounding the housing market, there is optimism from some industry professionals that there could be a significant upturn once lockdown measures have been lifted.
Iain McKenzie, CEO of The Guild of Property Professionals, said the lockdown was only a short-term obstacle to UK house prices.
While transactions are being hit hard and will likely be impacted for the next few months, it will be temporary,” he said. “I predict the market will start to recover shortly after restrictions are lifted. “New vendor enquiries are starting to recover week by week. [This points] to the fact that people want to move, but are currently unable to while the fight against coronavirus continues.”
Jeremy Leaf, north London estate agent and a former RICS residential chairman, said Nationwide’s recent figures hold hope for UK house prices.
“If, as we are finding, that most transactions have been put on hold rather than cancelled, then most could be reinstated if restrictions are eased soon, and economic damage is relatively limited,” he said.
* Data taken from Zoopla: https://advantage.zpg.co.uk/insights/cities-index-report/
** References and quotations taken from City A.M. articles: https://www.cityam.com/how-badly-will-coronavirus-hit-uk-house-prices-in-2020/