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House prices to drop by up to 10% and transactions by 36% this year

But Savills predicts economy and property market will recover quickly and return to pre-Coronavirus levels next year.

Nigel Lewis

house prices

Savills has revealed that house prices are to drop by up to 10% this year in the prime market as the economic downturn and the continuing difficulties of buying and selling homes impact the market.

The prediction was made during a webinar presentation yesterday by the company’s Head of UK Residential Research, Lucian Cook.

Looking at the prime market which Savills relies on so heavily, he said that 40 percent of the clients canvassed believed prices would drop, while 45% believed they would remain the same.

A further five percent, who appear to have spent too much time in their underground swimming pools during the crisis, believe prices will rise after the lockdown ends.

Savills says transaction levels will be hammered by the pandemic, dropping by 36% from 1.17 million in total last year to 745,000 this year.

In 2021 they will bounce back to 1.22 million sales and in 2022 rise even higher to 1.33 million.

V-shaped recession

Cook said he is expecting a ‘V’ shaped recession after lockdown, which is a steep slowdown in economic growth followed by a quick rebound in house prices and activity.

Also, he predicts that the post-lockdown housing recession will be less severe than the one prompted by the financial crash for several key reasons.

These include sluggish house price growth prior to the crisis, low interest rates and swift action by the government to protect jobs and businesses.

Read more Savills research.

 

May 6, 2020

One comment

  1. Annually there are 1m to 1.1m completions in the UK over past few years, this year my recent analysis has that completion number at 580,000. So 2008 levels.

    This has nothing to do with any bounce that is inevitable once agents are to a degree open for work, it is much to do with timing. A typical sales takes 20-weeks to go through, so to complete mid December or before the property needs to be listed mid July or before.

    Given the pandemic hit when seasonally all residential agents had low stock and were about to start their usual massive period of gaining instructions, late March to mid June, if agents are at say 60% capacity by the end of May start of June, it will take 6-weeks to get their stock levels up to where they need to be.

    Which means they hit the July buffer, and with best will in the world if the normal market appears (and we have furlough and recession in the air) there is not enough time to transact all the deals. Putting everyone under massive cash flow pressure.

    Maybe now – in this generation all parties will sort once and for all the archaic paper led, legacy made conveyancing and sales process out. Why can you walk in a top end dealership and buy a Bentley – a Bentayga Speed – for £186,000, in two hours, and it takes 20-weeks to buy a £50,000 terrace in Newcastle. Probably you could actually buy the car online.

    It is in the interest of agents cash flow, buyers convenience and stopping the 30% fall out rate and all the harm it does to all parties, for the law society, HM LR the lenders and the customers and agents and all stakeholders to get in front of one whiteboard and digitise the whole process – with some industry standards and truths we can change. Just as overnight we all became adept at video conferencing – that was national tech adoption in a heartbeat.

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