Like almost everything else, the housing market has been affected by the coronavirus. The first symptom was of course an abrupt halt to sales, with the lockdown in force and most estate agents forced to shut up shop.
Now estate agents are back at work – but what about the house prices? At Continuum we look at whether the epidemic will have a lasting effect on the health of the housing market.
Will house prices fall?
The coronavirus is still with us, but lockdown has been relaxed a little – and we can once again view, buy and sell properties. Estate agents may no longer shake our hands, but valuers can value properties, lenders can lend.
If everyone keeps a safe distance from one another, it looks as though houses can be bought and sold again. But will they?
There is some evidence that many deals may not be resumed after being put on hold by the emergency. The latest survey from the Royal Institution of Chartered Surveyors shows that roughly 80% of its members said they had seen buyers and sellers pull out of transactions last month.
So, sales numbers have fallen, which is understandable. Most people have had their financial circumstances changed for the worse by the crisis, and many are making the decision to stay where they are until conditions start to look a little brighter.
One consequence of reduced demand is usually a fall in prices, as people desperate to sell become prepared to take lower offers.
In fact, most surveyors seem to expect prices to fall, and for once, the various house price indices do not have much to tell us. The number of sales has fallen so low that the figures are completely unrepresentative.
The market had been fairly static for most of last year with worries about Brexit dampening enthusiasm. With a date for getting out of Europe set and negotiations begun in earnest, it was showing signs of perking up before the coronavirus struck. That growth is now being choked off.
The Centre for Economics and Business Research predicts that 2020 prices will be down by 13%. Estate agent Savills said the hit to the market could be more like 5%.
Will this be a long-term effect?
The UK is keen to get back to work, but the financial hangover of lockdown and ongoing effects of social distancing may mean that the economy, and as a consequence the housing market remains sluggish.
The Chancellor has spoken of a recession, and in recessions house prices fall. In the crash of the early 1990s, and the 2007-2009 financial crisis people lost their jobs. That meant that they could not pay their mortgages and thus became forced sellers. It also meant fewer potential buyers.
But in those recessions, the cause of the problems was financial – and high interest rates were the order of the day. In the post-coronavirus world, interest rates are at rock bottom.
It is impossible to predict the future. If the recession is short, and most people can keep their jobs, there may be little downward pressure on house prices in the medium and long term. In the short term, there could be some bargains to be had. Industry observers Knight Frank suggest a 3% fall in 2020 and rebound of up to 5% next year.
If you were considering a move before the crisis, you could do so again. You may be able to enjoy interest rates that are at their lowest levels for years, and of discounts from developers who are desperate to sell.
The mortgage market is opening up again too – but not all lenders have passed on the savings, and you need an expert to be sure that the deal you are getting really is the best.
At Continuum our mortgage specialists can help you secure the most appropriate mortgage deal from across the entire market. Not only do we know those lenders who are still lending, we can discuss the options such as fixing your rate now before rates bounce back
Make your next move a call to us.
The information contained in this article is based on the opinion of Continuum and does not constitute financial advice or a recommendation, you should seek independent financial advice before embarking on any course of action.
Your home may be repossessed if you do not keep up repayments on your mortgage.
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