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Stay safe, stay home – the housing market’s on hold

Kate Faulkner’s forecast: “Completed housing transaction volumes in 2020 Q2 will be 60% lower than the same period last year.”

Kate Faulkner

Link to Kate Faulkner

BEFORE CORONA VIRUS:

Rightmove: “Buyer boom sets scene for new price records this spring”
Home.co.uk:
“Home prices bounce to new high as confidence returns”
NAEA Propertymark:
“Number of sales agreed reaches six month high”
Halifax: “House prices remained stable in March before coronavirus restrictions introduced”
LSL Acadata HPI: “House prices continue to rise in February”
Hometrack: “UK city house price growth is +1.6%, higher than the +1.2% a year ago”

AFTER CORONA VIRUS:

RICS: “Housing market halted by Coronavirus”
Nationwide: “Annual house price growth edged higher before the pandemic struck the UK”

Up until the lockdown prices weren’t particularly buoyant, but all countries were seeing positive house price growth.

Country and regional summary (data from UK HPI)

Kate Faulkner imageRegionally, most areas were looking at some growth, bar the South West, East and South East, which according to the Land Registry, saw some small falls at the start of the year.

At city level, Hometrack recorded Nottingham as having the top year on year growth of 3.8%, closely followed by Leicester (3.6%), Edinburgh (3.4%) and Manchester (3.3%) along with Liverpool (3%).

Land Registry data suggests there was growth in the biggest cities and towns – Oxford, followed by Nottingham, Leeds, Sheffield and Cardiff.

Meanwhile, the Land Registry data suggests there was growth in the biggest cities and towns – Oxford, followed by Nottingham, Leeds, Sheffield and Cardiff.

Transaction wise, the NAEA saw average stocks dipping a little in January and February while agreed sales rose and Rightmove’s index shows that prior to Coronavirus hitting, properties were starting to sell a lot faster.

Link to Kate Faulkner

Record property market highs to lows

Reading through the property price report headlines, most give a picture of what was happening before the lockdown, while a few give guidance of what will happen to the market during lock down. Few however are brave enough to give guidance on what will happen when the market re-opens!

So before the stay at home measures kicked in, the market was heading for an excellent first half year with Rightmove predicting ‘new record highs’ and NAEA saying the ‘number of sales agreed reaches six month high’.

Landlords may choose to leave the market, after extended eviction notices and court closures; owners trading down may decide to move ASAP, adding to supply.

Then came the Government announcement of the stay at home measures, along with the guidance:-

“Where the property being moved into is vacant, then you can continue with this transaction although you should follow the guidance in this document on home removals.

“Where the property is currently occupied, we encourage all parties to do all they can to amicably agree alternative dates to move, for a time when it is likely that stay-at-home measures against coronavirus (COVID-19) will no longer be in place.”

Richard Donnell from Hometrack was one of the first out of the blocks suggesting “completed housing transaction volumes in 2020 Q2 being 60% lower than the same period last year”. They expect “low transaction volumes to continue into the third quarter. Individual months over the Spring may see newly agreed sales down by as much as 80% on last year”. Source

Savills suggest prices will fall from around -5% to -10% with transactions in 2020 being 38% to 53% lower and Knight Frank forecast prices to be -3% down in 2020 vs 2019 but bouncing back in 2021. Meanwhile, reports of the CEBR falls of up to -13% have hit the headlines.

What next?

In reality, we won’t know what will happen to the property market for a few months yet as we need a better understanding of the impact on the economy, most importantly on job losses. Although we have seen shocks to the economy before and have a good understanding of how the property market reacts, this is different. Some people will lose their livelihoods while others could be much better off financially.

We’ve seen shocks to the economy before and understand how the property market reacts; this is different. Some will lose their livelihoods while others could be much better off financially.

In addition, lenders will be critical in any market recovery. Will they restrict how much people can borrow and slow the market or still be happy lending at high LTVs?

Add to this a possible complete change in people’s attitude to property following the stay at home measures. Time at home could make people more or less likely to move. Depending on their experience, renters’ attitudes may change and some may decide they want to be homeowners, boosting demand. Landlords may choose to leave the market, especially after extended eviction notice and court closures, and those that have thought about trading down may decide to move asap, both adding to supply.

Be prepared

Whatever happens, agents, legal and search companies, surveyors and removers need to prepare for two scenarios. Firstly, what is the capacity to complete all the chains already in the pipeline before or during the stay at home measures? And secondly, will the new pipeline start slowly or suddenly take off?

The reality is, as we’ve seen since the credit crunch, it’s likely different postcodes will react in very different ways, partly depending on how buoyant the market was prior to Coronavirus hitting the country. Quiet markets are likely to take a while to move forward while busy markets could take off very quickly.

Whatever happens next, all the services in the property sector will need to be ready for both a sprint over the summer and a marathon if the property market doesn’t recover until 2021.

May 25, 2020

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