The UK property market has ground to a halt amid the coronavirus outbreak, but to what degree will house prices be affected by the slowdown? We take a look at what’s happened to house prices so far this year and offer advice on how the fight against COVID-19 could affect the value of UK homes.
The property market in 2020
Optimism briefly returned to the property market following December’s general election, with the number of sales rising by more than 12% in January as buyers and sellers awoke from a Brexit-induced slumber. But now the market is set to experience a significant slowdown, with estate agents having closed their doors, and UK residents told to stay at home and put any moves on hold. Zoopla says this could result in house sales plunging by as much as 60% in the second quarter of the year, when compared with the same period in 2019. The property portal says buyer demand dropped significantly before the lockdown, with a ‘rapidly growing’ proportion of sales falling through. The estate agency Knight Frank echoes these sentiments. It predicts the number of UK house sales will plummet from the 1.175 million recorded last year to just 734,000 this year.
What’s happened to house prices?
The most reliable barometer of house prices is the Land Registry’s UK House Price Index. The most recent data only goes up to January this year, when overall house prices fell by 1.1% month-on-month, but grew by 1.3% year-on-year to reach £231,185. This timeframe isn’t particularly useful in helping us understand the impact of coronavirus, as it covers transactions that would have been agreed before Christmas but were only completed and registered in January. With that in mind, we’re unlikely to know the true effect of coronavirus on house prices for a couple of months at least.
Price rises before the lockdown
Nationwide and Halifax have both released their monthly house price indices in the last week. Nationwide found that house prices increased by £3,000 in March, but stressed that its figures don’t cover the period since the government’s stay-at-home measures were introduced. Halifax claims prices increased by 3% year-on-year in March, but says fewer transactions will make it ‘more challenging’ to calculate house price changes in the next few months.
It’s too early to say exactly what impact the outbreak will have on the property market, but this is likely to mirror the rest of the economy. In the short-term, house price growth will stagnate as there will be fewer transactions going through. But as we saw with Brexit, the UK property market is very robust, so it’s highly unlikely that prices will crash in the coming months. Knight Frank forecasts that UK prices will fall by 3% this year, but then bounce back by 5% in 2021, in line with its predictions around the economy as a whole shrinking this year. Richard Donnell from Zoopla, says: ‘We do not expect any immediate impact on prices. Beyond the next few months, the outlook largely depends on how the government’s package of support for businesses and households reduces the scale of the economic impact. ‘The timing of any rebound in housing market activity depends on when the new restrictions are lifted and to what extent households and businesses are able to return to a normal way of life.’
So overall there is a sense that the UK housing market will be ok, if anything there could be a slight change in the coming months before then bouncing back to the post brexit boom.
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Data and report provided by Which?