UK house prices could fall by as much as 10 per cent this year due to the impact of coronavirus, experts predict.
UK house prices had started to recover from uncertainty caused by Brexit at the end of 2019.
And the so-called Boris bounce from the Tories’ election victory in December set the market up for a strong start to 2020.
But then coronavirus came along, sending the UK into lockdown – meaning buyers couldn’t visit houses, a fairly crucial step when moving house.
The dramatic economic hit has also made people more wary of making big purchases right now.
While the impact of the coronavirus outbreak on UK house prices is not yet fully understood, analysts believe they will dip in the second and third quarters of 2020.
The latest Rightmove research published this week showed the average price of property coming to market this month dipped 0.2 per cent to £311,950. By contrast, in April last year UK house prices increased 2.1 per cent.
The property platform said there is not a “functioning [housing] market” due to the coronavirus lockdown and that new sales were “almost impossible”.
Meanwhile, figures published this week by the Land Registry and the Office for National Statistics showed inflation fell back to 1.1 per cent in February after climbing to an eight-month high of 1.5 per cent in January.
What will happen to house prices in 2020?
Analyst predictions on the impact of coronavirus on UK house prices vary due to the uncertainty surrounding the lockdown exit plan and the wider economic impact.
Zoopla: Impossible to predict scale of blow
“History tells us that house prices tend to fall when the economy shrinks as a result of falling output,” says Richard Donnell, research director at property platform Zoopla.
“[This] has a knock on impact for unemployment or higher borrowing costs – all things that can result in more ‘forced sellers’.”
“Thus the scale of the impact on house prices depends upon the scale of the economic impact from Covid-19.”
Savills: House price fall of up to 10 per cent
Estate agent Savills estimated that average UK house prices will fall between five per cent and 10 per cent in the short-term while the low transaction market caused by the coronavirus lockdown continues.
EY: House prices could fall five per cent
Howard Archer, chief economist at EY Item Club, forecast that UK house prices could drop between three per cent to five per cent in the second and third quarters of 2020.
Knight Frank: Prices to sink three per cent
Meanwhile, Knight Frank predicted that average UK house prices will dip three per cent this year, and property values in London will fall two per cent.
Chesterton’s: House price drop of two per cent
London estate agent Chesterton’s also estimated that house prices in the capital will fall two per cent in 2020 due to coronavirus.
When will UK house prices bounce back from coronavirus?
Despite the gloomy outlook for house prices this year, most analysts believe the housing market could make a strong recovery by 2021.
CBRE said that pent up demand in the period after the coronavirus crisis is likely to cause a “spike in activity” in the housing market.
Knight Frank: London house prices to jump six per cent in 2021
Knight Frank forecast that London house prices will jump six per cent in 2021, while Chestertons said it expected to see growth of three to four per cent in central London next year.
Savills: London house prices to lead recovery
Despite forecasting a steep decline in UK house prices this year, Savills was more optimistic about the years ahead. The estate agent’s analysts say mid-term price growth will be an average of 15 per cent over the next five years, with prime central London leading the recovery.
EY: House price recovery of two per cent in 2021
However, EY Item Club’s Archer was more cautious, saying UK house prices could grow by two per cent next year.
“Given the impact on the economy from coronavirus, the likely substantial rise in unemployment and the impact on many people’s incomes, the housing market looks unlikely to return to the levels seen at the start of 2020 for some time,” he said.
By Jessica Clark
Source: City AM