Property prices in April appear to have swerved doomsday predictions, rising 2.7% on an annual basis.
Of course, it’s not all good news. On a monthly basis, house prices in April were 0.6% lower than in March, and the rate of growth is slowing. In the latest quarter, house prices were 0.7% higher than in the preceding three months. However, given the circumstances, the latest date is encouraging.
Jamie Johnson, CEO of FJP Investment, said: “Halifax’s findings should be viewed in an optimistic light. There’s been so much negative speculation about a potential house price crash that we fail to appreciate the positive news or listen to what the data we actually have to hand is telling us – namely, that in this volatile market, real estate has held its value or, in many areas, actually grown in price throughout the first four months of 2020.
“Yes, house prices have dropped month on month, but that is to be expected given the circumstances. Transactions have declined, but this a combination of major mortgage lenders retreating from the market and the obstacles of completing deals due to lockdown measures.
“What’s more, today’s findings suggest the property market is well-positioned to quickly recover once the pandemic subsides. If rumours are true and Boris Johnson begins relaxing lockdown measures this month, we could even see a surge in transaction activity as buyers and sellers look to push ahead with plans that have been on hold.”
Nonetheless, with so few housing transactions, the scant data is open to interpretation. Russell Galley, Managing Director, Halifax, said: “With market activity currently almost at a complete standstill, the limited number of transactions available means that calculating average house prices has inevitably become more challenging. This will lead to a great deal of volatility until more data becomes available.
“It will not be until after lockdown restrictions are eased that we will get a sense of the new temporary normal conditions for the housing market. Social distancing raises new challenges for home viewings and valuations and this will require the industry to adapt to build and maintain consumer confidence.
“More immediately, we are likely to see some considerable movement in activity levels as buyers and sellers seek to kick-start previously agreed transactions which are likely to have stalled or been delayed.
“The future remains uncertain and based on our current forecasting we expect short term headwinds to house prices, although we maintain our underlying confidence in the health of the housing market in the longer term.”
However, the longer-term outlook is also fraught with difficulty, with government advisers solemnly predicting that social distancing could become a new normal.
Paresh Raja, CEO of Market Financial Solutions, said: “In my opinion, this short-term fall in house price growth is likely to open new opportunities. Given the drop has been nowhere near as bad as initially predicted, buying a property now could result in notable price growth once COVID-19 has passed and the market recovers. After all, history has shown that the property market is able to bounce back quickly from crises.
“The challenge for buyers, however, is finding lenders who are still receiving new loan applications and have the resources to undertake on site valuations. As a result, I’d expect to see a general increase in the number of buyers looking beyond high street banks to specialist lenders for loans during this pandemic.”
Indeed, mortgage approvals have fallen sharply in March. Bank of England figures show that the number of mortgages approved to finance house purchases were 56,161 in March 2020 – this represents a 24% month-on-month fall from February, following four consecutive rises. After so few listings, stock will also be an issue when buyers return to the market.
Founder and Managing Director of Sourced Capital, Stephen Moss, said: “Potential plans to relax lockdown restrictions could bring a welcome boost to the UK market but while an increase in operational activity may help to an extent, the more extensive damage will be on stock entering the market and the demand for this stock.
“This impact will be fuelled more by fear than finance and it may take many months yet before buyers and sellers feel it is ‘safe’ to return to the fray. However, there remains an appetite from buyers with many still taking to the internet to window shop and once these shops reopen physically, we should see enough activity to tide things over until the end of the year.”
With many housebuilders and agents reporting surges in their website traffic, it’s doubtless demand has not been quashed by the lockdown. While buyers are being cautious, they have also had their hands tied with severe social distancing measures. Only once these are eased will we have a clear picture of the property market.
Founder and CEO of GetAgent.co.uk, Colby Short, said: “We know that the number of homes reaching the market has plummeted in the wake of the current pandemic and this, of course, has serious implications on the housing market in terms of transactional volume and prices.
“However, it’s important to remember that this isn’t driven purely by apprehensive sellers as many agents are simply unable to carry out their day to day work to actually market these properties. As restrictions ease, and the financial furlough precautions many have taken are reversed, a heightened level of activity should, at least, bring some positive movement.
“Yes, this may be muted to begin with, but with the market all but ground to a halt, any progress is a positive.”
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