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Economists and housing experts forecast price falls across the UK of up to 13%, with “brutal” declines in some areas as the property market struggles to rebuild during the coronavirus crisis.
The forecast range of the leading researchers is noticeably wider than usual. At one extreme is the Center for Economic and Business Research, which predicts that 2020 prices will drop 13% “because the lack of transactions, high uncertainty and falling revenues take their toll.” But real estate agent Savills said the impact on the market could be more than 5%, and a third of valuation pollsters predict that price drops may be limited to 4% or less.
The post-close market will be a buyer’s market, said Jonathan Hopper of Garrington Property Finders, as he forecasts falls of 10% nationally and 15% in some areas.
“Areas with a more resilient labor market should see how values hold up better, but elsewhere the price correction could be more brutal,” he said.
Knight Frank, in a revised forecast released this week, said he anticipated a 7% drop in 2020, more than his previous 3% forecast. Their analysis suggested that prices had already fallen 5% since March, with a further drop in sight.
“Our view is that as the market reopens in the next two months, the 5% drop in values we have seen since the end of March will be revealed in the pricing that has been achieved, and although there could be further pressure on the decline during the summer is likely to be limited, “the agent said.
The reopening of the property market will unlock many stagnant transactions, said Lucian Cook, head of residential research at Savills. But he added: “We hope that the newly agreed deals will take time to rebuild as buyers gradually regain confidence. More immediately, things like home visits and mortgage valuations will depend on homeowners being comfortable with the measures in place to protect their safety. ”
Savills expects short-term price drops of between 5% and 10%.
The market base is historically low interest rates, with a Bank of England base rate of just 0.1%. But forecasters are also weighing a large number of imponderables, such as the unemployment rate in the coming months, the level of construction activity and the availability of mortgage financing.
The type of home buyers are looking for may also change. The blockade has caused an increase in the number of potential home buyers planning to move. Out of town to a rural area, or a smaller town, when people conclude that working from home is here to stay, Savills said.
Conventional house price indices in recent months have been considered almost meaningless as transaction activity declined so precipitously that comparable national data are not available.
Last week Halifax said that monthly prices in April were 0.6% lower than in March, but added: “With market activity currently almost at a standstill, the limited number of transactions available means that calculating prices Average housing has inevitably become more challenging. “
The Office for National Statistics last week temporarily suspended its UK house price index from the April index until further notice.
However, for those sellers who hold on to a high price, there are a few crumbs of comfort from the auction market.
Auction House UK, which has 36 auction rooms across the country, said sales were still at 60% of normal levels. “We are also seeing many properties selling at well above their guide prices. In the past few weeks, 10 bidders have pushed a three-bedroom townhouse in London priced from £ 375,000 to £ 553,000.”
