The Housing Market in the UK is known for its volatility. Now, as people are confined to their homes, the property chain in many cases has been disrupted as all sales and moves are on hold.
Pre-Coronavirus Economy Housing Market
The housing market was in a fairly good position before Covid-19 called for a frozen market. The head of research at estate agent Knight Frank stated that the housing market was in a “strong position” for the first months of 2020, noticing a general trend of price increase and sales across the UK. For properties in central London, the market was beginning to experience a reversal of a five-year-long price decline. More houses were being built and round 70,000 mortgage approvals were made in February alone, which was the highest monthly figure in six years.
However, due to the wide-scale economic burdens being faced, the housing market must prepare for weaker economic activity than expected. Zoopla has warned that transaction volumes could fall by as much as 80% during the Spring compared with 2019 figures. Now, due to the lockdown, thousands of house moves are on hold with many transactions falling through completely, multiple delayed transactions, and many individuals left with legal costs. Though the situation seems bleak, experts are positive that this slump will be short-lived due to the finite nature of the crisis.
The Plummeting of House Prices
Even with this deep freeze of the housing market, expert analysis is predicting that house prices will only be falling by 3% and recovering in 2021. Regarding the number of house sales in the UK, the analysis predicts a 38% decrease compared to 2019, dropping from 1,175,000 to 734,000.
All of these statistics are based on the assumption that lockdown remains in place until the end of May; however, if lockdown is extended, these figures are subject to change. It is also predicted that tenancies agreed in markets across London and the home counties will be approximately 25% lower than the five-year average. With no housing transactions currently happening, estate agents are suffering. The majority of staff have been forced to accept furlough
Many of the sales “lost” in 2020, will be carried over to next year meaning that whilst it may be quiet this year, the many components of the property chain can expect the business to carry over to next year. That being said, of the nearly 526,000 “lost sales”, fewer than 50% are predicted to be recuperated.
Suggestions of government intervention have been made including a reduction in stamp duty in order to encourage buyers. In March 2020, Nationwide building society showed a surge of more than £3,000 in the average home price in Britain; the fastest pace in the last two years. However, this country-wide lockdown could change that. With government incentive and fallen house prices, this may be just what reluctant buyers need to enter the property ladder.