There is no doubt UK house prices have fallen during the Covid-19 outbreak. But by how much and to what extent depends on who you happen to be listening to at the time.
Doom-mongers, or realists depending on your point of view, such as the Centre for Economics and Business Research (CEBR), see property prices slashed by as much as 13 per cent, while upmarket Savills expects a more modest five per cent by the end of the year. Knight Frank are coming in with a seven per cent drop on house prices, while Lloyds hedges its bets at five per cent. The latter does go on to predict a two per cent recovery rate for 2021, though.
Don’t expect any official government statistics for some time though, the Office of National Statistics (ONS) temporarily halted its Index last month, until further notice.
Meanwhile, prior to the lockdown around 450,000 property transactions were believed to put on hold or worse, fallen through. One thing is for sure though, UK property is definitely a buyers’ market right now. Some estate agents are reporting buyers asking for discounts of up to 20 per cent.
Winners and losers
Prior to the effects of coronavirus, properties near good commuter rail links were good news for buyers. Now, not so much. Expect houses with gardens and spare rooms (for home working) to go for a higher premium. Many singletons have also been appreciating the companionships pets provide during lockdown – as a result, luxury apartment blocks will likely introduce a ban, which may not prove quite as attractive in today’s climate.
Meanwhile, areas with a resilient jobs market and technology hubs such as Manchester, will always do well. And as for home-working? An expected boom in this is resulting in areas providing a rural retreat to become far more prized than frenetic city-centre living.
What shape is the drop?
But could the curve be ‘V’ rather than ‘U’ shaped? Frank Knight reckon that the next couple of months could certainly see falls in value but that prices should start to climb again towards the end of summer as the market settles more. Certainly, some of those stalled transactions pre-lockdown will now go through, giving a boost to current conditions.
The construction sector was one of the first to go back to work so sales of New Builds aren’t expected to suffer much. Having said that, first time buyers are now faced with tougher mortgage conditions; many lenders have increased deposit demands from 10 per cent to 15 per cent post-coronavirus.
Meanwhile, Virgin Money are refusing to consider furloughed wages for mortgage applications. Fortunately, for thousands of other buyers or those looking to re-mortgage their current property, many lenders haven’t followed suit.
Mortgage rates still remain at almost unprecedented lows with financial analysts Moneyfacts recording them as the lowest levels ever since their own records began in 2007.
How quickly will the market reignite?
The speed at which the market picks up depends on how confident buyers are with social distancing measures and venturing into the open again. Also, how desperate they are to move and to sell. Economic conditions today prompted the government to extend its mortgage holiday scheme for a further three months, as well as its ban on house re-possessions.
Rightmove are confident it won’t take long for the property market to bounce back, having recorded 5.2 million viewers last Thursday – the day the market reopened in England. Interestingly for buy to let landlords, the majority of viewers were looking to rent.
