Coronavirus and house prices

The coronavirus is affecting every aspect of life in the UK, and the measures to combat the crisis seem to be getting more drastic every day.

With many investment portfolios experiencing extreme volatility, many people are now asking what the effect will be on the property market – and will UK house prices drop?

Things were going so well

Back in February, there were indications that interest in buying homes was picking up. London estate agents reported their highest buyer interest in 15 years. The numbers of potential buyers were 92% higher than the equivalent week last year, and up 95% on 2018.

It was looking that Brexit fears were being overcome. The market, after some corrections in areas such as a Central London which had become overheated, was regaining confidence and prices looked set for moderate growth.

Many who had been waiting for clarity on Brexit were returning to the market and the pent-up demand was unleashed. According to some measures, house prices grew at their fastest pace since October 2015.

But since February there has been the Coronavirus outbreak. With half the UK apparently working from home, and the other half besieging the supermarkets, the property market has ground to a halt.

Some new build developers build for overseas investors and have seen buyers dry up as travel restrictions bite.

Estate agents suggest that viewings have ground to a halt, as potential sellers are wary of strangers who could carry the infection coming in to their homes.  With more and more people self-isolating, the position is becoming more pronounced.  Those who were ready to buy may be similarly reluctant to risk exposure to the virus.

The position is made worse by financial worries as the restrictions increase. Some potential buyers are facing immediate reductions in pay as businesses shut shops, factories and offices. With the duration of the emergency unclear, many people’s financial security may have been affected.

Demand for housing is likely to dry up until the virus is contained, and the country can go back to work

Will prices fall?

Homebuyers and sellers will be looking for parallels with the financial crisis of 12 years ago.

In 2008, house prices suffered their biggest drop on record, plummeting by 16%.

However, the picture today may be fundamentally different. The roots of this crisis are not financial as they were back then. If the coronavirus can be contained within the 12-week timeframe, large house price falls may be unlikely. If that is the case, the market can be thought of as being put on hold, rather than collapsing.

Sellers may simply have to sit things out.

Are there deals to be done?

The government and the Bank of England are taking steps to stimulate the economy and minimise the impact of Coronavirus. The Bank of England has cut already-low interest rates from 0.75% to 0.1% – the lowest they have ever been.

Those with trackers, and those who have taken out buy-to-let mortgages which are generally interest-only will feel the benefit. A 0.64% drop in interest rates equates to a saving of more than £50 a month for every £100,000 borrowed.

The recent cut to the Bank of England’s base rate should also bring down some variable rate mortgage deals, which will benefit buyers.

It could be argued that – if you can find a property to buy – it could in fact be a good time to get on the ladder for the first time, or for those who have sold and are ready to get onto the next rung.

The problem is, most lenders are at this time are limiting their LTVs and in the current climate very few valuations are being carried out, putting house moves on hold.

Get a better mortgage

With interest rates now at very low levels, the best move in the current climate may simply be to shop around for the best mortgage deal.

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 fairest. At Continuum we can help – our mortgage specialists can help you secure the best rate from all the mortgages available, including those that are not advertised.

Call us now. We can discuss the options such as fixing your rate now in case rates bounce back, as well as ways to protect your income if the crisis goes on for longer than expected.

The information contained in this article is based on the opinion of Continuum and does not constitute financial advice or a recommendation to suitable investment strategy, you should seek independent financial advice before embarking on any course of action.

Your home or property may be repossessed if you do not keep up repayments on your mortgage.

References:

https://www.telegraph.co.uk/property/uk/will-happen-property-market-2020-will-brexit-deal-boost-house/