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Philip Hammond calls for UK economy to reopen

The former Chancellor Philip Hammond has called the government to ease the lockdown measures and reopen the UK economy.

Hammond told the BBC’s Radio 4’s Today programme, “The reality is that we have to start reopening the economy.

“But we have to do it living with Covid.

“We can’t wait until a vaccine is developed, produced in sufficient quantity and rolled out across the population.

“The economy won’t survive that long.”

Peel Hunt has just released the results of its COVID-19 survey of investors, corporate managers and other UK finance professions (banking/legal/accounting), revealing the City’s views on what shape the recovery will take, how investor habits and priorities will change post lockdown, and the outlook for corporates in a post-COVID market.

Source: London Loves Business

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How badly will coronavirus hit UK house prices in 2020?

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

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The UK housing market has shut down. But what happens after Covid-19?

Yesterday, we were talking about oil prices going negative. That’s pretty grim news for anyone producing the stuff (not so bad for consumers though).

Still, at least there’s still a market in oil. There’s one market that I know you’re all extremely interested in. But it’s impossible to get any prices for that one right now, according to one major market player.

I am, of course, talking about the wonderful UK housing market.

Will house prices crash or stagnate?
Earlier this week, online property portal Rightmove, which produces statistics on asking prices every month, said that the coronavirus lockdown has made it impossible to produce meaningful data on the subject.

And no wonder. Amid the lockdown, we’re effectively banned from selling or buying houses. So hardly any transactions are happening, and when they do, they’re likely to be atypical.

The question is: what happens after the market opens up again? I want to share some more general speculative thoughts today about what might happen next, but I’d also like to get your views, particularly if you’re actively looking to move or thinking about it. Send us an email to [email protected] with the subject line “House prices”.

Firstly, do we get a price crash? This is one I’m having trouble with. I think house prices should be lower and that property should be cheaper. I think our economy could shed a lot of its biggest problems if the basic act of finding and keeping a decent roof over our heads didn’t consume so much of our mental and financial resources.

But that’s a tricky problem to solve, so let’s park it for a moment. What happens in the immediate aftermath when we’re allowed to go out again?

Andrew Goodwin of Oxford Economics argues in The Times that “you only get a price crash when you have a combination of high interest rates and high unemployment.”

And I have to say I agree with this point. A crash really has to be driven by forced selling. Forced selling only happens when people are unable to pay their mortgages. That in turn only happens when mortgage costs spike, people lose their jobs, or both. This is what drove the crash in the early 1990s in the UK.

However, those conditions seem unlikely to recur now. Unemployment certainly is rising and some people will definitely struggle as a result. But for the time being, forbearance is being urged and the level of help from the social security system is far higher than during past crises.

And on top of that, it seems highly unlikely that interest rates will rise to a point where existing mortgages become unaffordable for large numbers of people. Quite apart from anything else, a far higher proportion of home loans are on fixed rates now. That’s before we even consider the fact that central banks are bound to repress rates for years to come.

What is potentially more of a risk is that the market freezes over because of a lack of credit availability. As Hansen Lu of Capital Economics puts it, “when the lockdown is lifted, we think credit supply will be a key determinant of whether house prices are stagnant, or whether they collapse.”

One potential issue is that the banks are going to see bad debts increasing during this crisis, regardless of how well cushioned the economy is. Commercial property loans are going to become a problem, what with companies going bust and proving unable or unwilling to pay rents. Credit cards are likely to see default rates spike too.

That might in turn make banks reluctant or unable to be as free and easy with mortgage lending as they have been in the past. In turn, that means that even ready and willing buyers will not be able to pay as much as they once might have, which means that sellers will either have to take a hit, or stay put.

So a crash might be unlikely, but in that scenario we’d get stagnation or falling prices (this wouldn’t in itself be a bad thing, but a stagnant market in terms of transactions is more of a problem – it makes labour mobility even worse than it is just now).

Are we going to see a mass migration to neglected seaside towns?
The other factor which will be very interesting to watch (and potentially more positive) is the change to commuting patterns. I am not always convinced by the idea that coronavirus will change our society radically. However, I do think that it will accelerate the trend towards working from home (among those who can).

Covid-19 has forced everyone to adapt to working from home and lots of organisations (and managers) will have realised that it is perfectly possible to do everything they were doing before without the daily commute and without everyone being in an office under the watchful eye of their line manager.

I’m not saying that we’ll dump offices altogether (though some companies will – that’s a big overhead and companies will be looking at how to cut costs long-term once this is over). But if people can work from home even two days a week, the distance they are willing to commute will rise, while their concerns about the reliability of the line will diminish.

What does that mean? Well, for now, the “location, location, location” mantra often boils down to – “what are the schools like?” and “how far is it from the nearest city centre?” If the second question becomes less of an issue, then suddenly you open up a whole load of nice but slightly down-at-heel areas.

Here in the southeast, for example, you’ll probably get an influx into coastal towns that aren’t Brighton. Live by the sea, in a house about twice the size you could get if you were a half-hour closer to London? That’s a trade-in a lot of people will be newly keen to make if they don’t have to do a daily trek to the office.

By John Stepek

Source: Money Week

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Why UK property will endure COVID-19 better than most

The UK Government’s implementation of strict social distancing laws in a bid to contain COVID-19 have been affecting the ways that businesses are able to operate, and how consumers are able to manage their finances.

At the moment, the government is providing the financial stimulus necessary to ensure the private sector is able to overcome the initial challenges posed by COVID-19 and the associated lockdown measures.

The direct and indirect impact of COVID-19 has affected the performance of different sectors and financial markets in different ways. The world’s major indices have suffered considerable losses – recently, it was reported that The Dow Jones Industrial Average crashed by almost 32%.

Other financial assets have so far proven resilient, such as UK real estate. I explore the reasons why this has been the case and what recent statistics tell us about property’s projected performance below.

The ‘Boris bounce’

House prices are typically used as an indicator of capital growth for real estate. In 2019, the political deadlock over Brexit resulted in significant market uncertainty and modest house price growth.

Some commentators feared house prices would drop significantly as a consequence of Brexit – however unlikely such events actually were.

Boris Johnson’s victory in the 2020 General Election and his subsequent ability to pass the EU Withdrawal Bill through parliament resulted in surging investor interest in residential real estate. House Price Indexes for March 2020 provided evidence to this affect.

Both Halifax and Nationwide recorded that average residential property prices that month were 3% higher than they were the year prior.

With Brexit uncertainty forgotten, sellers were again eager to place their properties on the market. Coupled with the government’s growing excitement about ushering their new ‘housebuilding revolution’, it seemed that the UK was finally ready to confront the ongoing housing crisis and match the growing demand for housing with the adequate level of supply; generating strong increases market activity and a return of strong value returns all-round.

COVID-19 has put a pause on transactions

Lockdown measures imposed by the government in a bid to contain the COVID-19 outbreak has had a significant impact on the real estate market.

For the moment, the government is actively discouraging people from buying and selling properties, and some lenders have reacted to this news by deciding not to take on new enquiries.

However, I believe the momentum around the post-‘Boris Bounce’-market has not disappeared. In fact, in lieu of transactions being available, pent-up demand is likely to further exacerbate market activity once the pandemic is over.

Global realtor Savills, in November 2018, forecasted that the average UK property’s value would increase 15% by 2024 – assuming a majority government is elected and a Brexit deal is agreed.

Although both of these events occurred, COVID-19’s economic disruption could have been a new impetus for Savills to revise this figure. However, Savills is confident that long-term demand for UK real estate will drive prices higher, resulting in them not changing their original projection.

Short-term forecasts were revised to take into account significantly the decreased transactions levels expected for the next two months or so, but the long-term predictions for growth weren’t altered.

Ultimately, it can be said that COVID-19 has, in a sense, taken the place of Brexit uncertainty in artificially supressing market activity and, thus, property price growth.

It is also worth mentioning that COVID-19 is a public health crisis, not an economic one. This means that once the virus is contained there is no reason to suggest why the property market will not make a quick recovery.

That’s why I am confident we will see a surge in activity once lockdown measures are lifted and the virus outbreak has been effectively resolved.

By Jamie Johnson

Source: Mortgage Introducer

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House prices predicted to fall after coronavirus: everything you need to know

UK house prices are set to tumble in the coming months, following the government’s announcement of lockdown extension. With the housing market already at a nearly complete halt, with many property instructions and mortgage approvals put on hold, house prices will almost inevitably fall in the coming months. The question is: ‘by how much’?

The Centre for Economics and Business Research (CEBR) has published a new forecast of the economic shock that will follow the Covid-19 pandemic. Citing research carried out by the Cambridge-INET institute, CEBR predict a 35 per cent reduction in income for UK households, with economic activity already down 31 per cent since the beginning of the pandemic.

What do these figures mean for house prices? A 13 per cent reduction by the end of 2020, according to the Centre – far harsher than the impact of Brexit over the past four years.

If you’re planning on selling, these are stark figures. How likely is this prediction to come true? Kate Faulkner, property analyst and expert at Propertychecklists.co.uk, gives her view:

‘The effect on house prices will be determined not just by how bad things get economically, but most importantly how long it goes on for. Scenario one could be a “short, but very sharp shock” and if we get back on our feet, prices may fall slightly – more if an area is particularly badly affected.

‘Scenario two would be a longer impact with prices falling maybe 10 per cent or more due to unemployment and difficulties accessing finance.

‘Scenario three could be back to the days of the credit crunch where a recession hit hard for several years and prices fell by around 20 per cent, more in some areas.’

However, as Kate explains, the biggest factor that will determine which scenario will come to pass is going to be people’s behaviour after the lockdown rules are finally relaxed:

‘Will [people] want to stay put more, limiting properties for sale? Will they want to move more, improving stock levels? Will people feel much poorer, reducing confidence to move in the future? Until the market opens up again and we know if we are in for a short sharp shock or a longer running recession, predicting the market is going to be difficult.

‘However what we do know is, that even in a recession, people still need to move and over 50 per cent of people in England own their home outright, so can continue to buy and sell with cash. Whether you decide to move this year or not very much depends on your local market and your personal circumstances.’

The difficulty in predicting what house prices will do in the coming months is exacerbated by the scarcity of current available information. In fact, there are so few homes up for sale right now that the property portal Rightmove has been unable to produce its monthly report on property trends, for the first time in the portal’s history. There simply aren’t enough property transactions to be statistically meaningful, Rightmove said.

Some experts are predicting a significant decline in property transactions throughout 2020, potentially even late into the year. The Zoopla House Price Index estimates a whopping 60 per cent decline in the next quarter. This means that both buying and selling will slow down dramatically.

This isn’t necessarily bad news, however: because both supply and demand are going down, those who still are looking to buy won’t be scrambling for a tiny number of properties, because far fewer people will be looking. It’s true that their may be less choice, but there still will be houses available.

If you are planning on buying in 2020, take heart: once the lockdown restrictions are lifted and lenders restore the full range of mortgage offers, the climate for buyers will be very auspicious indeed, with low interest rates on mortgages and falling house prices.

BY ANNA COTTRELL

Source: Real Homes

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Only a handful of landlords applying for a payment holiday need one

Mortgages for Business says only “a handful” of landlords contacting its switchboard about mortgage repayment holidays are raising legitimate concerns about how to pay their mortgage in the face of the Covid-19 pandemic.

The commercial and residential mortgage broker acknowledged there are landlords in geniune difficulty. But said most of the landlords it has been talking to since the scheme was opened do have sufficient means to get them through a difficult period.

Steve Olejnik, managing director of Mortgages for Business, commented: “We’re having a lot of discussions with landlords around payment holiday requests. Only a handful are raising legitimate concerns about how to pay their mortgage in the face of the Covid-19 pandemic.

“Quite apart from the moral implications of abusing an emergency mortgage repayment scheme brought in at a time of national crisis, it could play out badly for the landlord.”

Landlords need to think long and hard before submitting a request for a payment holiday to their mortgage lender. They shouldn’t ask for a payment holiday unless they need it, if only because it could affect current and future applications. Lenders are reconsidering applications when a landlord has asked for a payment holiday on their existing loans.

Olejnik said: “Landlords must be aware that any requests could potentially damage any approaches to that lender. Lenders expect landlords to be able to cover void periods under normal circumstances – where a property is empty, and a landlord isn’t getting any rent – so they won’t take kindly to landlords trying to take advantage of them just to build up some cash reserves.

“One borrower with three live cases with their lender approached them for repayment holidays on another, existing loan. The lender immediately cancelled all three.

“Smart landlords, who want to capitalise on short-term house price falls and expand their portfolios when the lockdown is lifted, should think long and hard before approaching their lender.”

Additionally, Mortgages for Business points out that most buy-to-let lenders will ask landlords to prove they are in financial hardship before granting any holiday request. While a landlord’s ultimate tenant may be in distress and unable to make rental payments – to benefit from the scheme, landlords also need to unable to meet their mortgage repayments.

Olejnik added: “The message is simple. Do not approach lenders for payment holidays without first taking advice and thinking about the longer-term consequences. Don’t jump on the repayment holiday bandwagon.

“Any deferred payments will have to be made at some stage and it could create problems down the line – especially when you come to refinance or grow the portfolio.”

Landlords facing genuine financial hardship, who cannot afford to meet a mortgage repayment, should not cancel their direct debit payment to lenders, assuming a repayment holiday will be granted. Lenders will class this as a ‘missed payment’ and it will affect a landlord’s credit profile.

By Joanne Atkin

Source: Mortgage Finance Gazette

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This is a re-set moment for creating value in retail property

Take a moment to look at the havoc wrought in the past few weeks: Debenhams, Carluccio’s, Laura Ashley, Cath Kidston and more have all entered administration or are about to; £7.7bn has been lost in market capitalisation from the top four UK retail REITs; 66% of March’s rent was unpaid; 500,000-plus non-essential stores were banned from trading; and footfall was down 90%-plus.

The tide has gone out and left everyone exposed. The question is: can retail survive the coming months?

The evidence so far is that many companies will not. Of those that have gone under to date, a number had underlying issues, but in the coming weeks we will likely see failures of businesses that were trading well pre-lockdown.

And do not think it is a case of weathering this storm before returning to normal: in the same way that lockdown has created a ‘new normal’, so the post-Covid-19 situation will be a step change again, for ours is now a world in fast-forward.

The lockdown has accelerated many of the nascent consumer trends that were already under way; we have jumped forward five years in the space of two weeks. Now the genie is out the bottle, we will not be able to go back. Every aspect of our lives has changed and, with necessity being the mother of invention, we have seen huge upheaval matched by inspiring innovation, often driven by the smaller, more nimble operators.

That combination of consumer acceleration and economic fallout is now forcing retail property to face many of the challenges that had been repeatedly kicked down the road.

Some of these, like business rates, are political. The majority, however, are self-inflicted. Among these, the most glaring of all is how we value the store. A lease structure grounded in 1950s behaviours was already anachronistic, but now it is no longer fit for purpose.

The impact of Covid-19 has been to tighten the focus of consumers: into the local area, into what they put in their baskets and their mouths and which brands they allow into their lives.

Brands that can create that connection and immediate relevance will be the ones that survive and indeed thrive. The store remains the greatest portal to do this, and valuing it accurately should be the top of both occupiers’ and owners’ to-do lists, albeit from very different perspectives.

So how do you bring together two traditionally opposing points of views? Start by equally sharing risk and reward – the heated arguments between owner and occupier can only be resolved if both sides co-operate. This means agreeing objective, measurable terms of engagement and structuring a lease that reflects this with a larger proportion reflective of sales performance.

Two-way communication

The owner must deliver both high-quality and high-quantity footfall and prove to the occupier that it is doing so. Evidence of who the shopper is, where they come from and how they are behaving should be fully shared.

In return, the occupier must be open on customer engagement by sharing sales data – not just turnover through the till but also returns, click & collect and online sales within the catchment.

In today’s data-rich world, the insight is available, and where it is not there are third-party alternatives. CACI works with both owners and occupiers, as well as high-frequency datasets, to provide that objective, neutral space where confidential data can be shared without commercial confidences being breached. Having an objective third party applying a pre-agreed methodology allows all concerned to reach a position where the store is accurately valued and future uncertainty and risk reflected.

The new normal will be a world in fast-forward. Those that move with the consumer, co-operate, innovate and engage with one another will survive.

Those that fight the tide are destined to fail.

By Alex McCulloch

Source: Property Week

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Coronavirus business loans hit £450m but doubts about scheme remain

UK banks have now lent £453m through the government’s coronavirus business loans scheme as it picks up following an overhaul, although a large number of firms are still struggling to access the cash they need.

The Treasury said today that more than 2,500 loans for business had been approved as of yesterday via the coronavirus business interruption loan scheme (CBILS). This was up from Monday’s 2,022 figure that was revealed yesterday by City A.M.

It also announced that industry body UK Finance will start to publish regular updates on the scheme from next Wednesday.

Yesterday’s CBILS figures mark a significant increase from last Wednesday’s, when only £90.5m had been lent out to 983 businesses.

Yet the number of loans handed out is still only a small proportion of the number of enquiries companies have made about the scheme, which range in the hundreds of thousands.

Those requests are coming from some of the almost 6m small and medium-sized firms in the UK. They have monthly payroll costs of roughly £41bn, according to economic consultancy Fideres.

The CBILS programme offers loans via banks to small businesses with turnover of up to £45m. It was launched as part of the government’s £330bn coronavirus lending pledge.

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Business owners criticised the stringent terms, however, leading chancellor Rishi Sunak to overhaul the scheme last Thursday. In particular, he got rid of the rule that said firms must have exhausted commercial options first.

The Treasury today said the revamp is working as intended. “We’re working with the banks to get this support out. We’re making good progress,” a Treasury spokesperson said.

Loans still too slow for many

Yet many firms report that the service is still not working properly. Some have said they have requested assistance but have not heard back from banks.

Adam Leon, managing director of recruitment firm Orlik Leon in Bath, said the slow pace of the CBILS application process meant he had to take out an overdraft from his bank Barclays to tide him over until he received his loan.

“When I approached the bank I was told the process would take two-to-three weeks,” he told City A.M.

“Today I was told I will be lucky if I get it in four-to-five weeks. As a result the bank has offered me an overdraft which I had to sign a personal guarantee for to get through the eight-week period.”

Leigh Bryant, the director of motorhome repair company LNB Towbars in Bristol told City A.M. he had applied online for CBILS through Natwest, Barclays and Hitachi Capital. But he said he was yet to hear back from any of them.

“There must be millions of small businesses like me that are so dependent on that money because we don’t have the cash flow to carry on for months at a time with nothing coming in,” he said.

Mike Cherry, national chair of the Federation of Small Businesses, said: “We’re hearing reports that – despite these being ’emergency’ loans – the application process for securing them is still very demanding. Of course lending can only be made to viable businesses, but banks need to understand that time is of the essence.”

Banking industry body UK Finance, which compiles the figures, said lenders are “working hard to provide loans to all viable businesses who need it as quickly as possible”.

A spokesperson said banks are committed to helping the country “through this difficult period”.

By Harry Robertson

Source: City AM

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Too early to assess long-term impact of lockdown on UK housing market

The latest Halifax House Price index figures for quarter ending March will not yet reflect the affects the lockdown has had on the housing market.

It was reported that house prices in March were 3.0% higher than in the same month a year earlier, but on a monthly basis, house prices were flat at 0.0%. In the latest quarter (January to March) house prices were 2.1% higher than in the preceding three months (October to December)

Russell Galley, Managing Director, Halifax, said: “The UK housing market began March with similar trends to previous months, as key market indicators showed a sustained level of buyer and seller activity. Overall average house prices in the month were little changed from February’s record high, while annual growth nudged up to 3%.

“These factors all underlined a positive trajectory and increased momentum in the early part of the year, with confidence rising as political and economic uncertainty eased. However, it’s clear we ended the month in very different territory as a result of the country’s response to the coronavirus pandemic.

“On a practical level, most market activity has been paused, with the public rightly following advice to stay at home, and estate agencies, surveyors and conveyancers temporarily closing as a result. With viewings cancelled and movers being encouraged to put transactions on hold, activity will inevitably fall sharply in the coming months. It should be noted that with less data available, calculating average house prices is likely to become more challenging in the short-term.

“However, it’s still too early to properly assess what potential long-term impacts the current lockdown might have on the UK housing market. While there is very significant uncertainty at the moment, much will depend on the length of time it takes for restrictions to be lifted, the pressure that has been exerted on the economy in the meantime and the effect this has on consumer sentiment.

“Lenders have stepped up to offer their support, giving customers up to an additional three months to complete their home purchase at the agreed mortgage rate, alongside payment holidays for existing customers. We continue to have confidence in the fundamental strength of the housing market and remain.”

Source: Property118

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The UK housing market and coronavirus: The chances of recovery in 2020

With stock markets crashing all over the world due to the coronavirus pandemic, there are fears that the UK housing market could also be badly hit. To understand the chance of this happening, we need to look at the current situation and what might happen next.

The situation before March

The country’s housing market was motoring along nicely before the coronavirus outbreak caused havoc. Figures from Nationwide Building Society show that British house prices increased by an annual growth rate of 3% in the month before the lockdown was imposed. This was the fastest rate in two years.

This was due to a monthly rise is 0.8%, which followed on from 0.3% in February. The annual growth rate in February was 2.3%. The average house price in the UK rose to £219,583 in March. The surge had been led by booming cities such as Manchester and Liverpool but most areas have seen good growth recently.

The different ways the market has been affected

The impact of the coronavirus can be put into different categories.

  • Lockdown measures mean that potential buyers are unable to view properties that they might be interested in.
  • The huge effect on the economy means that many people are unemployed or facing an uncertain future. Around 950,000 new welfare claimants applied in the second half of March, according to the Department for Work and Pensions.
  • Banks have made it more difficult for people to borrow on new mortgages. Some have withdrawn high loan to value deals and others don’t take overtime or bonuses into account as salary.
  • Official government advice is to avoid property transactions.
  • Many people have decided that buying a new home isn’t a priority.

These factors all add up to give us a UK housing market that is grinding to a standstill. To put it simply, the whole market has stopped and will remain that way until life gets back to normal.

The sort of price falls we can expect are unclear

There is no doubt that house prices will be affected by this period of uncertainty and economic gloom. The main issue is that it is extremely difficult to predict any figures. With virtually no transactions going through just now, there is a lack of data to base future estimates on.

The British economy is set for a deep recession. The last time this happened was in 2008, when housing prices crashed through the floor. In fact, it was so drastic that by 2017 property prices in a quarter of UK towns were still below their 2007 peak.

It is feared that the 2020 slump could be even worse than what happened in 2008.On the other hand, the more optimistic predictions suggest that it may just be a short-term wobble, like the way that Brexit affected property prices. It has also been pointed out that the severe economic damage down by the swine flu in 2009 didn’t stop house prices from soaring in the following year.

The chances of recovery in 2020

Very few analysts want to make predictions in this situation, particularly since we don’t even know how badly UK house prices will be hit.

However, the main hope is that overall economic weakness doesn’t tend to depress the UK housing market for long. It is possible that it bounces straight back as soon as the lockdown ends and people get back to their normal lives again.

The fact that interest rates are so low is sure to be a factor. Anyone who has the cash and the stability to buy a house might see this as being a great time to do so. Therefore, it is unlikely that we see the market standing still for too long.

In the best case scenario, prices will fall in the short term and recover by the end of 2020, but there are still too many unknown factors to bet on this being the case.

By Robert Bell

Source: Invezz