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Britain’s housing market may avoid a nasty crash

There is a general presumption that the reopening of the UK housing market following the pandemic freeze must be negative for house prices. But it is too early to be sure. Lucian Cook, the head of residential research at Savills, warns against jumping to any conclusions until data on transactions is available.

In March, new buyers’ enquiries and new instructions collapsed “like never before”, making it “difficult to get an indication of the impact on prices for a while”. Generally, economic downturns coincide with falling house prices. In recent years, however, house prices have been falling in inflation-adjusted terms. The absence of a run-up in house prices before the virus “should insulate the market from significant house-price falls”, reckons Cook. In the short term, sentiment will be a factor, but “in the long term, it will come back to economic fundamentals”.

The first of those is affordability. With interest rates at 0.1%, the cost of mortgage debt is very low, despite more limited availability. Unemployment, however, could be a more serious problem, bringing some forced sales and making people cautious about moving up the housing ladder. Savills uses the forecasts of Oxford Economics. It predicts a 15% drop in GDP in the second quarter followed by an 8% rebound in the third and slowing growth thereafter. A downside scenario has a further 2.5% drop in the third quarter, but higher subsequent growth. The baseline forecast results in unemployment rising from 4% to 6%, not enough to have a significant lasting impact on the housing market, but the downside scenario has unemployment reaching 10%.

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These factors, together with government action to support jobs and a benevolent approach to arrears by lenders should temper the impact on housing. Nonetheless, the number of transactions will take several years to recover to the pre-pandemic level of 300,000 a quarter, owing to a lack of confidence by both buyers and sellers. Savills’ central expectation is that prices will rise 15% over the next five years, with a 5% decline this year followed by steady increases in subsequent years. Its more pessimistic scenario sees a 10% fall this year, but faster growth thereafter.

Will the southeast keep lagging?

Savills expects a continuation of the recent trend – perhaps interrupted by an uptick in regional unemployment in the short term – of London and the southeast underperforming the Midlands and north, given how extended house prices relative to the national average became, particularly in London. Prime central London prices, however, are 20% below 2014 levels, while prime London properties and those in other regions worth more than £2m are 5% below, having been heavily affected by tax changes and political uncertainty. So these markets “were looking pretty good value” going into the downturn. Savills reports higher unprompted web traffic than before the pandemic, while new buyer registrations, both from British and overseas buyers, have risen strongly.

In a survey of 600 clients, 37% of respondents have become less committed to moving over the next six months, but 27% more inclined to do so. Over 12 and 24 months, that negative balance reverses to +9% and +29% more committed to moving. “Spending much more time at home has made the quirks and idiosyncrasies of home more apparent, which may act as a spur to moving.” Covid-19 has also made rural properties much more appealing, especially for those with school-age children, offering the prospect of a renaissance for those locations. This preference extends to suburban London; people want larger houses with gardens.

This is not necessarily negative for central London or other urban locations. For international buyers, total buy, sell and hold costs are competitive with other major cities worldwide and they will have noted the comparative leniency of the UK’s lockdown. Younger people will still want to live in cities and those now hankering for village and country life may come to miss the vast array of restaurants and entertainment facilities. The cost and convenience of travel will favour city living, especially as roads become more congested and public transport returns to normal. “Further price softening in London will offer a compelling buying opportunity,” says Savills.

Undoubtedly, there will be more working from home. This will increase the space requirement at home, favouring houses over flats and properties with even modest gardens to those without. Demand for second homes will probably increase; the government’s advice to stay away from them in the lockdown was widely ignored. Price expectations in the Savills survey show nearly half expecting no change and half expecting price falls. But buyers are more negative than sellers, so may have to adjust their expectations. Though Cook didn’t give explicit advice to those thinking of moving, the message between-the-lines was “get on with it and don’t expect any bargains”.

By Max King

Source: Money Week

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House Prices Fall But Signs Of New Interest

Amid mixed messages about the current state of the housing market, Nationwide has reported a sharp fall in house prices.

Its latest house price index fell by 1.7 per cent in May, the largest monthly fall since February 2009. As a result, the annual rate of house price growth slowed to 1.8 per cent, down from 3.7 per cent in April.

This put the current average price of a house at just under £219,000, £4,000 down on April.

‘Housing market activity has slowed sharply as a result of the measures implemented to control the spread of the virus’, commented Nationwide’s chief economist Robert Gardner.

‘Our recent market research survey suggested that around 12 per cent of the population had put off moving as a result of the lockdown. Most viewed the current situation as a temporary pause in the market, with would-be buyers now planning to wait six months on average before looking to enter the market’.

House buyers’ housing preferences may also have been changed by the lockdown, noted Gardner. Around 15 per cent of people surveyed said they were considering moving as a result of life in lockdown, with a third saying they thought differently about their home as result of the Covid-19 outbreak, especially the importance of a garden and the need for more indoor space.

Meanwhile online property companies such as Zoopla have reported a surge in online house searches, with growing demand for rural properties offering additional garden space.

Source: Residential Landlord

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House Prices Set For Short-Term Hit

Coronavirus-hit buyer confidence will translate into short term house price falls of between 5 and 10 per cent, said researchers at international property agents Savills.

But such a drop would be smaller than the price falls experienced in the early 1990s recession or in the Global Financial Crisis, suggested authors of the firm’s May UK Housing Market Update, Ed Hampton and Chris Buckle.

The pace of recovery in prices after the initial falls will depend on the state of the wider economy, although the signs are not too encouraging. The May forecast from Oxford Economics anticipates the UK’s Gross Domestic Product 0.7 per cent lower by the end of 2024 than it expected in April, says the Update. ‘This will have a knock-on effect on household incomes’.

On the plus side, interest rates are also now expected to be lower for longer. ‘Our November forecast for 15 per cent UK house price growth over the five years to 2024 included an assumption that the Bank of England base rate would rise to 2 per cent by the end of that period. Oxford Economics’ current forecast is for it to be 1 per cent’, say Hampton and Buckle.

‘The trade-off between borrowing costs and income rises will determine the medium term outlook for house prices, once the initial crisis has passed’.

But at least the market is moving again. And ‘short term activity will be supported by a degree of pent up demand and some buyers may now have a greater inclination to move following lockdown. There is now particular emphasis on moving for more space, and to the countryside.

It is also possible that the new homes market may recover faster, due to it being easier to perform virtual and socially distanced viewings in new build homes.

‘While this bodes well for an increase in activity, it is starting from the exceptionally low levels observed during lockdown. Data from the main property search portals suggests that sales agreed and new listings were at around 10 to 20 per cent of the levels seen immediately before the lockdown, although buyer browsing levels have been higher’.

Low activity levels are also reflected in mortgage lending data. New mortgage approvals fell to their lowest level in March since early 2013. The drop was particularly sharp as it followed an exceptionally strong February, which had been the strongest month since early 2014, said Savills.

Source: Residential Landlord

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Will the UK housing market be skewed towards buyers in 2020?

As the English housing market is released from lockdown, prospective home owners will want to know whether the remaining months of 2020 will provide the right circumstances for a buyer’s market. Will house prices go down, and will it be easier to negotiate a lower house price?

With home moves and house viewings now allowed, and lenders once again offering first-time buyer mortgages, those who have been after that dream home may want to hurry: the time to haggle for the house you’ve always wanted is now.

Property experts are predicting that there will indeed be a window of opportunity for first-time buyers to be in a position to negotiate the house prices down by substantial amounts – but that window will be small, no longer than six months.

In contradiction to the dramatic house price fall of 13 per cent issued by the Centre for Economics and Business Research, major UK estate agent chains such as Savills and Knight Frank are predicting more modest decreases of between four and six per cent this year, with the biggest impact likely to be felt up until the end of this year. The latest Halifax house price index is showing a drop in house prices of just 0.6 per cent in April.

Our advice is: if you are a first-time buyer and want to take advantage of falling house prices, you may not have very much time. There will be a buyer’s market, but don’t assume this will still be the case in 2021.

Also bear in mind that not all properties will come with significant price drops even immediately after the coronavirus lockdown. Property auctions, for example, are continuing to fetch well above the asking price in desirable areas such as London, so if you’re after a prime location home, there may not be much of a difference when you try to buy one.

BY ANNA COTTRELL

Source: Real Homes

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House prices are set to fall in 2020, but there is positive news, too

House prices are set to fall in 2020 as the result of coronavirus – something everyone who was planning on buying or selling a home this year will already know. Whether you had been planning on taking out a mortgage, or were already at the moving stage, Covid-19 put the spanner in the works of most property-related activity in the UK as lockdown measures kicked in in late March.

What can we expect from the property market apart from the widely predicted 10 per cent fall in house prices? Some intriguing new research by Zoopla suggests that the future of the UK property market – at least in the short term – may move online.

The Zoopla Cities House Price Index shows that online browsing of properties is recovering. Although the levels are still down 37 per cent from 1st March, they have increased substantially from the 23rd March when browsing activity plummeted 50 per cent.

The other fact uncovered by the research is that the number of properties available for sale has not fallen as dramatically as some were predicted: only four per cent of homes appear to have been withdrawn from sale, meaning that the vast majority are still being advertised by estate agents.

More positive news: Halifax’s house price index showed that house prices rose 2.7 per cent year-on-year to £238,511 in April; and quarterly, house prices increased by 0.7 per cent. It’s only when you look at price variations on a monthly basis that you see the average price of a house in the UK has dropped by 0.6 per cent.

So, given that both demand and supply are showing signs of recovery, the question remains: how viewings and evaluations be carried out once the lockdown is lifted? Social distancing measures are likely to remain in place in some form at least until the end of the year, so how will the property buying scene cope?

Although internet browsing in itself is no indicator of change – most people begin their home purchasing journey by looking at properties online – it may be that we see a sharp increase in online property viewings and virtual evaluations in the coming months. This could become the brave new world of house purchasing for many during 2020, if the processes for virtual property buying become more established.

Richard Donnell, Director of Research & Insight at Zoopla, said:

‘There is a two-speed housing market at present. Parts of the market are at a virtual standstill as a result of the physical restrictions that have stopped new supply coming to the market and the viewing of homes for sale.

‘However, the online browsing of homes for sale and buyers expressing interest in property have been rising off a low base over the last two to three weeks. Demand for housing is still 60 per cent lower than at the start of March, but we expect interest in housing to continue to improve slowly.

‘Many people have spent more time at home in the last few weeks and some may feel the urge to move and find more space or consider the potential for remote working. This could boost activity in the second half of 2020, but this all depends upon how much the economy is impacted over the rest of the year and the impact on levels of unemployment.’

BY ANNA COTTRELL

Source: Real Homes

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House prices dip by 0.6%

Average property prices fell by 0.6% between March and April, Halifax’s House Price Index has revealed.

Prices averaged £238,511 in April, after mortgage approvals fell by 24% between February and April.

Annual growth still stands at 2.7%.

Jeremy Leaf, north London estate agent and a former RICS residential chairman, said: “Lockdown restrictions are rendering these and other housing market surveys fairly meaningless.

“It is only when you look behind the figures that a more interesting picture emerges – in other words, what we are seeing on the ground are previously agreed sales proceeding to exchange and completion without price renegotiation and a buildup of browsing interest as buyers and sellers ready themselves for easing of restrictions.

“Buyers and sellers are also taking advantage of interest rates remaining low for the foreseeable future.

“Overall, we are being told that transactions are stalled and will be revisited as soon as it is safe to do so and particularly surveyors and removers are able to gain access to properties.”

Paresh Raja, chief executive of Market Financial Solutions, said: “In my opinion, this short-term fall in house price growth is likely to open new opportunities.

“Given the drop has been nowhere near as bad as initially predicted, buying a property now could result in notable price growth once COVID-19 has passed and the market recovers. After all, history has shown that the property market is able to bounce back quickly from crises.

“The challenge for buyers, however, is finding lenders who are still receiving new loan applications and have the resources to undertake on site valuations. As a result, I’d expect to see a general increase in the number of buyers looking beyond high street banks to specialist lenders for loans during this pandemic.”

BY RYAN BEMBRIDGE

Source: Property Wire

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The UK property market saw an uptick in April, but that could be all for now

  • The UK property market experienced a rise in prices in April, according to research by Nationwide.
  • The 3.7% uptick marked a three-year high amid the Coronavirus pandemic.
  • However, the bank and mortgage firm noted in its report that last month’s jump is set to come to a halt.

Last month there were occasional jumps in the UK property prices but according to a recent report by Nationwide, the market recovery signs are set to come to a halt amid the Covid-19 pandemic. While house prices rose by 3.7% last month representing a three-year high, the impact of the pandemic was not factored in the percentage, the British mutual financial institution said.

Nationwide’s House Price Index for April utilizes mortgage approval information and there is currently a backlog of submitted mortgage applications pending approvals. According to the company’s chief economist Robert Gardner, a big chunk of last month’s data relates to mortgages that “commenced before the lockdown.”

On average, a property in the UK goes for about £222,915 today.

The number of approved mortgages fell to about 56,200 in March, hitting a seven-year low, a report by the Bank of England revealed on Friday.

The drop in the number of mortgage approvals indicates the “the early effects of the outbreak on mortgage markets that had just a month earlier been at their most active in five years,” managing partner at Knight Frank Finance Simon Gammon noted in a report.

The UK Covid-19 lockdown began on March 23, following a sharp increase in the number of new cases and death toll. As of April 30, an average of 177,000 people had tested positive for Covid-19 while more than 27,000 lives had been lost, this according to official data by the Department of Health and Social Care.

Great start, tough times ahead

According to Gardner, since the beginning of this year, “activity levels and price growth were edging up thanks to continued robust labour market conditions, low borrowing costs and a more stable political backdrop following the general election.”

“But housing market activity is now grinding to a halt as a result of the measures implemented to control the spread of the virus, and where the government has recommended not entering into housing transactions during this period,” said the economist.

That notwithstanding, even before the pandemic, the UK property market had experienced massive dips, mainly resulting from last year’s Premiership elections anxiety as well as the Brexit deal uncertainty.

By Auther Bett

Source: Invezz

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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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House prices in Wales on the rise before pandemic crisis

The average house price in Wales rose by £6,110 annually to £193,286, before the coronavirus crisis began in the UK.

The figures have been released from Principality Building Society’s Wales House Price Index for Q1 (Jan-Feb) 2020, which demonstrates the rise and fall in house prices in each of the 22 local authorities in Wales.

The new average house price for Wales represents a 3.3 per cent rise compared to the same period 12 months ago.

Principality’s report shows that before the coronavirus crisis started, the improving economic situation, with continuing historically low interest rates and high employment rates, had contributed to creating a robust housing market.

Low cost ‘affordable’ housing in proximity to areas of relatively high employment was another factor, with Wales seeing the highest increase in the number of first-time buyers of all the regional areas in the UK in Q1 of 2020.

Tom Denman, chief financial officer at Principality Building Society, said: “Although they feel largely irrelevant now, the figures give us a snapshot of the economy and housing market before the Covid-19 pandemic.

“In the opening months of 2020, before the pandemic struck the UK, the housing market had been steadily gathering momentum. It is evident that price growth was edging up in Wales thanks to a bounce in confidence following the general election, high employment rates, plus low interest rates but transactions were down year on year.”

In February, there were 16 local authority areas in Wales with a positive movement in house price growth annually, with six areas (Blaenau Gwent, Ceredigion, Conwy, Gwynedd, Newport and Wrexham) seeing prices fall.

Bridgend experienced the highest annual price increase at 9.1 per cent to £181,494.

By Laurence Kilgannon

Source: Insider Media

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UK house price inflation hit two-year high prior to lockdown

In Q1 of 2020, UK house price inflation increased by 3.3% compared to a year earlier, the best reading since the early months of 2018, according to IHS Markit’s analysis of the Halifax House Price Index.

The previous quarter had seen an increase of 2.3% on a year earlier, in comparison.

The acceleration in Q1 2020 has been attributed to increased economic and political stability.

Seasonally adjusted figures show house prices jumped by 2.1% over Q1, compared the preceding quarter, when they increased by just 1.1%.

Stronger increases in prices were recorded across all buyer and property types during the first quarter of 2020; for example, first time buyer inflation hit a three year high, increasing by 3.8%, while for house movers inflation increased by 3.0%.

Existing properties (3.4%) recorded a stronger price increase than new houses (2.6%).

Broken down by region, Northern Ireland showed the strongest outright price gains, followed by the North West, West Midlands and Scotland.

In each case, inflation rates were at or above 4% year-on-year during Q1 of 2020.

Wales (3.9%) and Yorkshire and the Humber (3.5%) both also registered stronger inflation rates than the national average.

Inflation rates across the south of England remained below the UK average, but London and the South East recorded their first annual price gains since late 2028, with inflation increases of 2.3% and 2.8%, respectively.

For Western England (1.2%) and the South West (1.7%), inflation rates were the strongest in over a year.

Despite recording the slowest annual increases in the UK, the South of England continued to show the highest property prices in the country.

London remains well ahead of all regions, with typical house prices moving towards £500,000 in Q1.

Despite strong price gains, Northern Ireland remains one of the cheapest places to purchase a house in the UK, with prices remaining below £150,000.

The recent uptick in house prices led to a related increase in the price-to-earnings ratio at the beginning of 2020, up to 6.19 from 6.10 at the end of 2019.

This ratio is currently tracking its highest level since Q3 of 2018, and remain the most acute in Greater London and the South East.

Paul Smith, economics director at IHS Markit, said: “Although the latest data provide an indication of an improving housing market following the strong uplift to activity afforded to buyers and vendors from the greater political certainty seen at the end of 2019, it’s hard not to look ahead to the coming months given the outlook is now dominated by the COVID-19 pandemic.

“With that in mind, the first quarter data feel backward looking.

“Whilst confirming the market was on a positive trajectory, as activity strengthened following a clarification over Brexit and the decisive general election result, the direction of travel is now characterised by considerable uncertainty.

“Amid reports of viewings being cancelled and movers encouraged to put transactions on hold, the market is currently in deep-freeze.

“More worryingly, the challenging macro-environment, with business closures, joblessness rising and cuts to incomes occurring, all points to a general downward pressure on prices in the near-term.

“The ultimate scale of the impact of the pandemic on the market will ultimately depend on the speed in which it can be brought under control.

“Encouragingly, however, actions by government and the Bank of England are likely to provide strong support to the economy – and in turn the housing market – when some form of normality resumes.”

By Jessica Bird

Source: Mortgage Introducer