Ironically, before the coronavirus hit, the housing market was in rude health. The much anticipated Boris Bounce meant prices were rising across the board. According to Nationwide, annual house price growth hit 3% in March, up from 2.3% the previous month – the fastest pace since January 2018. And, after five difficult years, Prime Central London was also showing signs of a significant upturn.
Asking prices on Rightmove were up 5.1%, year on year. Coronavirus lockdown has since made a nonsense of those figures, with the market, of necessity, frozen and most agencies temporarily shutting their doors. So what next?
Asking prices rose by 0.8% in February and Rightmove’s website had a record 152 million visits. The number of sellers is also on the increase, but they’re not keeping up with the number of buyers. Between 12th January to 8th February, there were 110,000 new properties listed on Rightmove, an increase of 2.1%. It’s considerably below the 9.2% rise in buying activity and that was from an already low base. The good news is that all this activity is resulting in increased sales, which were up by 12.3% when compared to this time last year and by an impressive 26.4% in London.The truth is, no-one knows. We are in completely uncharted territory. The housing market is very much wedded to the economy, but people are equally unsure about what will happen to the economy. There is general agreement there will be some serious effects in the very short term, but how quickly will we recover? Most commentators are praising the government’s rapid response to the crisis (testing aside) and it is hoped it may significantly shorten the dip. For the housing market, those measures included mortgage holidays for homeowners and landlords. The other unanswerable question, though, is how long we will be locked down – the longer it goes on, the greater the damage.
So what are the various industry insiders saying about housing? Knight Frank, one of the larger agency chains, believes, as a result of the lockdown, sales volumes will be cut by over a third this year. They do not, however, expect prices to crash, instead, reducing by a relatively modest 3% in 2020 and then rising by 5% next year. In London, they are predicting prices to remain flat for 2020 and then go up by 3% in 2021.
“Another of the chains, Savills, are also expecting a larger fall in sales volumes – somewhere between 38% and 53% but then making a full recovery by May 2021. They are predicting prices may come down by around 5%-10% in the very short-term but that’s on the back of some very low transaction levels. In Prime Central London, they believe price falls will continue to slow and that there will be a return to growth for areas just outside it.
Richard Donnell, of property portal, Zoopla, says:
‘We do not expect any immediate impact on prices. Beyond the next few months, the outlook largely depends on how the government’s package of support for businesses and households reduces the scale of the economic impact. The timing of any rebound in housing market activity depends on when the new restrictions are lifted and to what extent households and businesses are able to return to a normal way of life.’
There is also the issue of pent-up demand. There was plenty of it being released onto the market in the aftermath of Boris Johnson’s election victory and there will be even more after three months of lockdown. Not forgetting, births, deaths and divorces will carry on regardless, ensuring there will always be movement in the housing market.
Our priorities might change a little though, and in a few unexpected areas, too, such as increased demand for outside spaces and home offices. Putting precise value figures on it all and trying to forecast transaction volumes, though, is too inexact a science at best. At least for the time being. Instead, we’ll just have to wait and see how it all pans out.