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The property market looked like it was bouncing back in 2020, getting off to its strongest start for four years. However, the coronavirus impact on the housing market has bought this crashing down.
Halifax, in it’s February House Price Index, reported an annual increase in house prices of 2.8 per cent in 2020. However, predicted that coronavirus could pose a potential road bump.
‘The UK housing market has remained steady heading into early spring,’ said Russell Galley, managing director of Halifax, commenting on the report. ‘The sustained level of buyer and seller activity is strong compared to recent years. With positive employment conditions and a competitive mortgage market continuing to support demand.’
‘Looking ahead, there are a number of risks, including the potential impact of coronavirus, which continues to exert pressure on the economy,’ he explained. ‘We wait to see how these will affect housing market sentiment later in the year.’
Coronavirus impact on the housing market
Zoopla’s latest UK Cities House Price Index has revealed that Halifax’s prediction has come true.
The Price Index revealed that Covid-19 has already led to a 40 per cent drop in demand for housing in the last week. Fall through of sales have also grown rapidly and are 60 per cent higher than the week before.
It is no surprised that interest from new buyers have fallen dramatically as the UK is placed into partial lock down, and the population is advised to stay at home. However, sales continue to be agreed, but at a much slower rate with it 15 per cent down on last week and 4 per cent down on last year.
Due to the knock on affects of the coronavirus on the housing market, Zoopla predicts that newly agreed sales will be down by up to 80 per cent on last year.
However, it isn’t all bad news. Zoopla predicts that while we may see an impact on house sales, it shouldn’t have a direct impact on house prices over the next few months. House prices tend to fall in times of economy stress rather than global impacts. Hopefully Government and lender action to suspend mortgage payments and support business will help stem the number of forced quick sales that could drag house prices down.
‘Covid-19 presents a major new challenge – not just for the housing market but for the UK and global economies,’ explains Richard Donnell, director of research and insight at Zoopla. ‘Fifty years of history shows that external shocks have impacted the housing market to differing degrees, largely down to the scale of direct impact on the UK economy.’
‘The initial impact of external shocks is to reduce consumer confidence and put a brake on housing demand and the number of people moving home, which we can see in our latest figures,’ he adds.
‘We do not expect any immediate impact on prices,’ he explains.’ Beyond this, the outlook for house prices largely depends upon how Government’s major package of support for business and households reduces the scale of the economic impact. Low mortgage rates mean forbearance will remain the preferred choice for lenders, but further Government support in these unique times cannot be ruled out.’
‘The timing of any rebound in housing market activity depends upon when new restrictions are lifted, and the extent to which households and businesses are able to return to a normal way of life.’
All we can do is stay inside and make sure we are following Government advice to help us return to normal life as soon as possible.