How will the Coronavirus affect house prices?
The Property Market Is A House Of Cards During Pandemic
During the last few months, the COVID-19 pandemic has touched every corner of our lives including our health, our businesses and our jobs. Unsurprisingly, one corner of the industry which has been deeply affected by the coronavirus is that of the property market. In April, estate agents in the UK were forced to close their doors as the country went into lockdown; only emerging on the 12th of May when restrictions were lifted. During this time, of course, the residential property market was left in limbo with the public unable to either buy or sell homes. The result of this was the biggest monthly drop in house prices for 11 years – a staggering fall of 1.7%.
Banks fear lending a hand
The hardest hit during this crisis is most certainly first-time buyers. Finance site, Moneyfacts, revealed a steep drop in the number of 10% deposit mortgages being offered – a drop of almost 89%; from 780 to 87. At the same time, 5% deposit deals fell to just 30, meaning that many first time buyers are finding that the vital first step on the ladder is now beyond their reach. As with most things, there are differing opinions on the subject of the future of house prices, however, most UK estate agents and financial institutions agree that we will most likely see a drop in price of between 2% and 10% during 2020.
Some, like property investor, Jonathan Rowland, fear that restrictions on lending may lead to a housing market crash similar to that seen in 2008. Jonathan says, ‘’Holding back on lending causes problems for the market,’ he said. ‘We’ve just seen a great example of that recently with businesses struggling to get loans. If that’s replicated in the mortgage market banks could be personally responsible for the collapse of the property market and we could even have another 2008 situation’.
Slow and steady
Although the house price drop seen early in the year has been devastating, it may not all be bad news. As the UK emerges from lockdown, Chestertons estate agents reported that viewings have tripled since the property market reopened, meaning that the industry is very much back in business.
In terms of house prices, whilst many have predicted an overall downturn by the end of the year, this month, The Nationwide Building Society reported that prices had risen 1.4% over the year; an upturn which, in some regions, overtook wags and the cost of living. Guy Gittins, Managing Director of Chestertons said, ‘The number of viewings shows that confidence in property has not been shaken by the impact of coronavirus. If sales continue at this rate, supported by low mortgage rates, we could see prices recover a lot quicker than many predicted’.
This note of optimism is reinforced by figures just in which show that agreed sales have now climbed 4% compared to pre-lockdown figures and, asking prices of homes sold in June have seen an increase of 7% year on year. With absolutely no reason to believe that this trajectory won’t continue – or at least plateau, it seems that house prices will see a bounce back which is almost as extraordinary as this year has been.
As we pass the halfway point in 2020, further easing of lockdown restrictions will no doubt have an impact on the property market and on house prices and, we eagerly await the next episode of what has been an extraordinary year.