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TODAY'S OTHER NEWS

Housing transactions set to drop by up to 60% over the next three months

Historically, economic uncertainty and market volatility are detrimental to the housing market, and the latest observations on the impacts of coronavirus suggest that housing transactions are set to drop by as much as 60% over the next three months. 

Before the outbreak of Covid-19, the UK housing market got off to its strongest start for four years, with average annual house price growth hitting 1.6% across UK Cities in February, according to Zoopla. 

But activity in the market has been hit hard in the wake of Covid-19’s impact from early March onwards.

The social distancing strategy has created an immediate impediment to property viewings and valuations, which are integral to the process of buying and selling a home.

Purchases already agreed and moving towards exchange of contract are continuing, but a rapidly growing proportion of sales are starting to fall-through, as buyers reassess the necessity of a large financial decision. Fall throughs last week were 60% higher than the previous week, but new sales agreed currently remain higher than fall-throughs by four to one.

A fall in demand is expected to culminate in a reduction in sales agreed towards the end of the quarter and into the summer months, given the time lag between marketing a home to agreeing a sale and completing a transaction - a process that can take four to six months end to end.

 

Zoopla Research modelling indicates a fall in transaction volumes of up to 60% over the second quarter of 2020, but some individual spring months may see newly agreed sales down by up to 80% on last year given the shutdown of normal life and knock-on impact for the market.

While it is too early to forecast the impact of Covid-19 on the UK economy, house prices are not expected to change materially in the next month or two, particularly as a proportion of sales agreed in the last two months will continue to completion, according to Zoopla. 

Richard Donnell, director of research and insight at Zoopla, said: “Covid-19 presents a major new challenge - not just for the housing market but for the UK and global economies. Fifty years of history shows that external shocks have impacted the housing market to differing degrees, largely down to the scale of direct impact on the UK economy.

“The initial impact of external shocks is to reduce consumer confidence and put a brake on housing demand and the number of people moving home, which we can see in our latest figures. Levels of property transactions are typically more volatile than changes in house prices.

“We do not expect any immediate impact on prices. Beyond this, the outlook for house prices largely depends upon how the Government’s major package of support for business and households reduces the scale of the economic impact. Low mortgage rates mean forbearance will remain the preferred choice for lenders, but further Government support in these unique times cannot be ruled out.

“The timing of any rebound in housing market activity depends upon when new restrictions are lifted, and the extent to which households and businesses are able to return to a normal way of life. Browsing for homes online is set to continue and, while demand for property may rebound quickly, it will take several months for agents to rebuild new business pipelines.”

  • Mark Wilson

    Richard Donnell, director of research and insight at the portal company, says: “We do not expect any immediate impact on prices. - I don't think so? Who would pay the same price today for a property compared to 2 or 3 months ago? And a drop of 60% in sales headline, two optimistic statements!

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    Very optimistic statements, I would have thought a drop in sales to zero personally, and values will certainly drop when we get back to normal, property has been over valued for a long time, a correction has been well over due, be a good few estate agents going bankrupt and likely some of the big names.

     
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    Demand drops off a cliff, but prices remain the same? Economics 101 begs to differ....

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    Simple history and the LAW of supply and demand..there is a growing supply of houses for sale right now with no one but fools buying and that will just get bigger as this virus takes hold.
    So the markets going to plummet very soon, no question.

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    • 27 March 2020 00:45 AM

    People simply will not sell in a price reducing market unless they are able to buy also at a reduced price.
    If they can't they won't sell.
    Only those forced to sell because of the 3 D's will have to take a hit on the price.

    Lenders will tighten up their criteria lending primarily to those who have remained fully employed and paid during CV19 crisis.
    Anyone else won't stand a chance of a mortgage.
    All those who become fraudulent accidental LL will have to let to lodgers only so as to not commit fraud.

    Single households will struggle to source rental property while single lodgers should be spoilt for choice.

    The only way homeowners can legally let to tenants is by obtaining CTL.
    But not worth doing now due the new CGT regulations on April 6th.
    Taking in lodgers doesn't affect resi mortgage conditions.
    Lodgers don't affect the PPR status of the property.
    The OO only has to be there once per month to conform to resi buildings insurance conditions.
    No more than 4 lodgers to avoid Mandatory HMO Licensing requirements.
    It seems the love affair with short term lettings has finished.
    That market has been destroyed by CV19.
    Boring old single household lettings where you are clobbered by S24 is the only option.
    FHL might be another option when this CV19 thing is over.

    Stock to sell will be very limited.
    It will be like the 90's where not a lot happened.
    People couldn't sell at the price they wanted so just kept them and let them out fraudulently.





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    Good time to buy in the 90s, when I bought most of mine for peanuts, because few had the balls to buy.

     
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    Same with me, although Scotland hasn't had the volatility of English markets.

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    • 28 March 2020 13:03 PM

    Chaps you will struggle to buy.
    Lenders will require far larger deposits.
    Valuers will downvalue always.
    How much spare cash do you have available no matter how cheap a property is.

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    Paul I always buy for cash, whether it be a house, car or what ever, that's the way I was brought up, save first then buy, my properties come from the auction room as do my cars and I never pay more than £10k for a car I cannot see the point in driving anything more expensive.

     
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