The Market After Lockdown
published on 29/04/2020
The ban on viewings and house moves as part of coronavirus lock down has brought the UK property market to near-total standstill.
Anyone who was thinking of buying or selling a home before the pandemic hit will be wondering how the market is going to look, as we all figure out what the “new normal” is after Covid-19.
If you were in the middle of a sale, should you now ask the vendor for a discount on the property you are hoping to buy? If you’re selling your home, should you accept a lower offer before prices plummet?
Will house prices fall after lockdown?
One of the best ways to judge how much a property is worth is to see what is being asked for similar homes, or how much they have sold for recently.
Monthly house price reports from such data sources as the Land Registry and Rightmove are the best tools for this, offering an overview of thousands of homes for sale.
However, with the market on hold for the foreseeable future, these indices will take months to offer enough data again, as Rightmove’s Miles Shipside pointed out in a webinar led by the property portal.
The housing market commentator said it’s particularly difficult to predict whether house prices will fall and by how much because the nature of the current crisis is different to previous downturns we’ve seen, being caused by global health, rather than economic circumstances.
The 2008 house price crash was in part caused by tough restrictions on borrowing: “One of the reasons it was called a credit crunch was because it was hard to get credit, you needed a 40 or 50 per cent deposit to get approved for a mortgage.”
Combined with higher interest rates, this meant there was more negative equity and a greater number of repossessions, causing house prices to fall, along with a steep rise in unemployment and wage stagnation, leaving many would-be buyers unable to capitalise on cheaper house prices.
By comparison, Shipside pointed out that a combination of pent-up demand, which has been building for the four years since the EU referendum, and freely available mortgages at low rates, as well as a fairly even balance between supply and demand are likely to see house price growth settle before potentially returning to the gentle increases seen since December’.
He said: “I think as we leave lockdown we’ll see a relatively benign flat period. I can’t see the forces that would usually drive house prices down at work at the moment but I do think there’ll be a slow-motion period where people get used to the new social distancing rules, and where housing might not be at the top of everyone’s list.
"I think this might last for several months but my gut feeling is that, after that, we’ll see a continuation of upwards price pressure once people get used to social distancing.”