The sudden appearance of COVID-19 and the resulting pandemic caused the world to focus on the immediate problems, with the aim of containing the virus. As the numbers infected continue to plunge, the UK is gradually re-opening and thoughts are now turning to the future.
The enforced lockdown, lack of revenue, job losses and continued restrictions will inevitably have an enormous economic impact. The OECD has predicted that the UK will be one of the nations to suffer the biggest blow. But what is the impact on house prices likely to be? We take a look.
How the Property Market Looks Now
The lockdown effectively put a freeze on all home-buying activity with potential purchasers unable to look round properties on the market. That changed on the 14th of May, when the government eased restrictions to allow home-buying activity to recommence.
Although buying and selling houses is now possible, the signs are that many are still reluctant. One survey from Zoopla found that around four out of 10 homeowners had decided to shelve their plans to sell. This is backed up by Rightmove recording a 65% drop in the number of properties listed for sale after the restrictions were eased, compared to the same time last year.
Property experts Knight Frank and Savills predict a maximum number of completed house moves this year of 734,000 and 745,000 respectively. This compares to 1.175 million last year.
Not all the signs are as gloomy however. Rightmove say that the amount of traffic on its website has returned to pre-lockdown levels, meaning we still want a brand-new home just as much.
House House Price Predictions
The phrase “unprecedented times” may feel overused, but it really is the case. No-one can be absolutely sure about what the market is going to do. The one thing everyone agrees on is that there will be repercussions.
In general, the housing market is expected to mimic the general economy. This means a sharp initial dip in prices for 2020, followed by at least a partial recovery in 2021.
Here’s what some of the experts are saying:
- Knight Frank predict a 3% drop in 2020 and a 5% rise in 2021
- Savills have suggested two models – one forecasts a 5% drop and a 5% rise; the other is less optimistic with a 10% plunge and just 4% recovery in 2021.
- Lloyds Banking Groups say prices will fall by 5% this year and inch back up by 2% in 2021
Many sellers have reported requests from buyers to drop their price by up to 30%. While it may be a buyer’s market for a while, prices are not expected to fall by dramatic amounts – but it may take longer to sell.
Renovations
When the market is stagnant, one alternative that many turn to is renovations. A number of mortgage providers have withdrawn or limited their low-deposit mortgages so some buyers will have no option but to renovate rather than move.
This could create demand for architects and possibly an increase in waiting times for project completion. Architects have been hit heavily by the pandemic with a third of projects cancelled, and around 80% reporting significant delays. Industry experts predict an initial contraction in work for architects in 2020, followed by a sharp upswing in 2021.
The other factor is the availability of fixtures and fittings. With disruptions to the supply chain, homeowners may find there’s less choice or lengthy delays to get exactly what they want.
Slow Recovery
While there’s a lot of uncertainty, it’s clear that the property market will experience a downturn, at least in the short term.
This is expected to extend to architects and renovations, as well as property sales. Recovery into 2021 is anticipated but much depends on the stimulus provided by the government to help the economy back onto its feet.
If you’d like some information about redesigning your home or the options you have post COVID-19, get in touch with Sidorova Design today.
