The property market’s buoyant start to the year has come to an abrupt halt due to the current lockdown.
In February of this year, mortgage approvals for house purchases had risen to 73,546 – the highest level since January 2014, according to Bank of England data.
But in March, all that changed.
THE PROPERTY MARKET IN LOCKDOWN
Data shows that UK house prices have dropped during the lockdown as the nation copes with social restrictions.
Rightmove data revealed that the average price of property coming to market decreased by 0.2% to £311,950. Whereas in April last year, house prices increased by 2.1% in the UK.
Meanwhile, Zoopla data shows buyer demand fell by 70% since March 7th, which is when concerns over the virus began to impact on consumer activity.
However, due to the exceptional nature of the current crisis, many feel these statistics have limited value, as essentially the market is not currently functioning.
When Rightmove released its monthly index of asking prices without a headline figure, it said that there weren’t enough properties coming to market to provide meaningful new asking prices.
WILL THERE BE A BOUNCE-BACK?
House prices are expected to remain static during the lockdown. But it’s anticipated demand will pick up once restrictions are eased.
“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 has been rising off a low base over the last two-three weeks,” said Richard Donnell, director of research and insight at Zoopla.
Fortunately, mortgage interest rates are at their lowest level ever. And as homeowners are being offered mortgage payment holidays and government support, it’s hoped that no one will be forced into selling or accepting lower prices in the short term.
Although it’s felt that house price growth will decline, any data on house prices will be unreliable and possibly volatile, with not enough transactions going through to offer an accurate picture of the situation.
WHAT WILL BE THE LONG-TERM IMPACT ON PROPERTY PRICES?
The impact on the property market in the future remains to be seen and very much depends on how long disruption carries on for. And the long-term effect it has on the economy.
It’s anticipated there will be a flurry of activity when lockdown restrictions are lifted. But, if there’s also a rise in unemployment, this may dampen the long-term prospects for the property market.
As Richard Donnell at Zoopla, commented: “History tells us that house prices tend to fall when the economy shrinks as a result of falling output. 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.”
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