Wage cuts and a surge in unemployment threaten to destabilize the housing market on an unprecedented scale, as the number of tenants who are unable to afford to pay their rent increases sharply, new research shows.
The market has also stalled because buyers are unable to purchase property, and prices are likely to fall as a result.
According to a report by the Centre for Economics and Business Research (CEBR), the economic pain of the COVID-19 epidemic has “tremendous potential” to disrupt the housing market, placing downward pressure on home prices and on the number of transactions in the housing market.
With the coronavirus crisis having a devastating impact on incomes, the study found that residential property prices could drop by an average of up to 13% by the end of this year.
The data published by the CEBR comes after the same think tank warned that the current lockdown has shrunk economic activity by 31%.
Yorkshire and East Anglia are expected to be the hardest hit with property prices set to drop by 16.5% this year, followed by a 16% drop in the North West and West Midlands.
The plunge in prices would take up to £38,000 off the price of an average UK home.
"Although the government have offered up a vast package of support, this lack of demand will mean some businesses cease to operate, many workers will lose their jobs and a lot more will face a cut in incomes," the CEBR warned.
"Housing is the single biggest expenditure item for faced by most households, which means that the shortfall in incomes has a tremendous potential to disrupt the UK’s housing markets."