At the early stages of the coronavirus crisis, when lockdown was being hurriedly organised without any sign of an end date, the effect on the property market was already being considered. Huge falls were predicted as the economy went into meltdown.
In the past few weeks we have seen steps taken which suggest that we are (hopefully) coming out of lockdown and the economic standstill it led to, there are signs that any meltdown could be more of a fizzle.
At Continuum we are looking at the opinions – and the facts.
What are people saying?
The coronavirus shutdown is unprecedented, and its economic effects are actually impossible to predict. However, some contraction in the economy might be inevitable. The Chancellor of the Exchequer and the Governor of the Bank of England are both introducing measures to mitigate a downturn.
But despite their efforts, some pundits are predicting the worst. Lloyds have gone on record as predicting an enormous 30% fall in property prices over the next 36 months. Estate agents Savills are rather less pessimistic and have suggested a short dip of 5% during the summer, based on very low transaction numbers, with property prices bouncing back to be just over 15% higher in five years’ time.
It is still early days, with many people only just heading back to work and many nursing a personal financial hangover, but far from falling, there are signs that the market may not even stumble.
The market has other ideas
The market may have come back to life with a vengeance. Many estate and letting agents have reported that national activity is even higher now than it was in the January and February post-election ‘Boris Bounce’ period. The asking prices of many properties put up for sale after lockdown have actually risen, reflecting the optimism of sellers in the reopened market.
Property website Rightmove, reported that the average asking price of homes in England was 1.9% higher in May, after market restrictions were lifted, compared to March.
It also found that these optimistic asking prices were being met. Since lockdown, buyers paid an average 97.7% of the asking price, higher than the level measured in February, at 96.6%, according to Land Registry data.
As is usual when house prices are concerned, the picture is never quite clear. Asking prices only reflect sellers’ sentiment, rather than buyers attitudes.
There are concerns over economic factors. Leading mortgage lenders Halifax and Nationwide both base their indices on actual mortgage offers. They reported monthly house price falls in May, but at just 0.5% and 1.7% respectively these were far smaller than those dire predictions from earlier in the year.
Up or down?
So what direction are house prices really going in?
Rightmove’s figures suggest that vendors are hoping to take advantage of demand built up over the last three months. They suggest that the closing of the property market affected 175,000 sellers who could not put their homes up for sale or progress a sale that had been agreed.
Some may be trying to exchange quickly. This pent-up demand may have meant upwards price pressure, rather than downwards.
But this may not be the whole story. Data from upmarket property agents Savills show that most of the sales agreed so far since restrictions were lifted has been for high priced homes. The rest of the market may not be moving upwards at the same rate.
Some estate agents have said that buyers are already asking for discounts of 5% to 10%, but that many sellers are holding firm for now.
In a nutshell: A limited pool of stock has supported asking prices since the market reopened, but many potential buyers are now locked out of the market because they have been furloughed. Things could fall back a little – but nothing like as dramatically as was suggested in the past.
Lenders may still have jitters. First-time buyers are being squeezed, as low-deposit mortgages are pulled, but there are still many mortgage bargains to be had, with historically low rates to take advantage of.
If you believe you have found a property you want for a good price, there could be every reason to buy it – and little reason to worry too much about price falls.
Of course, you will still need the most suitable mortgage deal. At Continuum, our experts can search the entire market, and take advantage of deals that are not generally advertised with the aim of helping you save money on your next move.
Call us now for the help you need.
Your home may be repossessed if you do not keep up repayments on your mortgage.
The information contained in this article is based on the opinion of Continuum following information obtained from third parties and does not constitute financial advice or a recommendation, you should seek independent financial advice before embarking on any course of action.
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