How will coronavirus affect property prices?

The UK property market has ground to a halt amid the coronavirus outbreak, but to what degree will house prices be affected by the slowdown?

Read more: https://www.which.co.uk/news/2020/04/how-will-the-coronavirus-affect-house-prices/ - Which?

The UK property market has ground to a halt amid the coronavirus outbreak, but to what degree will house prices be affected by the slowdown? Read more: https://www.which.co.uk/news/2020/04/how-will-the-coronavirus-affect-house-prices. The property market in 2020 Optimism briefly returned to the property market following December’s general election, with the number of sales rising by more than 12% in January as buyers and sellers awoke from a Brexit-induced slumber. But now the market is experiencing a significant slowdown, with estate agents having closed their doors and UK residents told to stay at home and put any moves on hold. Zoopla says this could result in house sales plunging by as much as 60% in the second quarter of the year, when compared with the same period in 2019. The property portal says buyer demand dropped significantly before the lockdown, with a ‘rapidly growing’ proportion of sales falling through. The estate agency Knight Frank echoes these sentiments. It predicts the number of UK house sales will plummet from the 1.175 million recorded last year to just 734,000 this year.

What’s happened to house prices?
The most reliable barometer of house prices is the Land Registry’s UK House Price Index. The most recent data only goes up to February, when overall house prices fell by 0.6% month-on-month, but grew by 1.1% year-on-year to reach £230,232. This timeframe isn’t particularly useful in helping us understand the impact of coronavirus, as it covers transactions that would have been agreed before the government introduced its stay-at-home measures. Earlier this week, the property portal Rightmove released its monthly index of asking prices without a headline figure, as it said there were ‘not enough properties coming to market to provide meaningful new asking prices’.

Price rises before the lockdown Nationwide and Halifax released their house price indices for March earlier this month.
Nationwide found that house prices increased by £3,000, but stressed that the figures didn’t cover the lockdown period. Halifax claims prices increased by 3% year-on-year in March, but says fewer transactions will make it ‘more challenging’ to calculate house price changes in the next few months.

Will coronavirus affect house prices?
It’s too early to say exactly what impact the outbreak will have on the property market, but this is likely to mirror the rest of the economy. In the short-term, house price growth will stagnate and price data may be volatile and unreliable, as there will be very few transactions going through. But as we saw with Brexit, the UK property market is very robust, so it’s highly unlikely that prices will crash. Knight Frank forecasts that UK prices will fall by 3% this year, but then bounce back by 5% in 2021, in line with its predictions around the economy as a whole shrinking this year. Rightmove says three things will be required to kick-start the market after lockdown: a continuation of low-cost mortgage lending and government incentives, lenders limiting forced sales and safe and innovative house viewing procedures.