UK house prices fall at fastest rate since 2009 amid coronavirus crisis

  • 6/3/2020
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House prices across the UK fell at the fastest rate last month since the financial crisis, as prospective buyers said they would wait six months before returning to the housing market. The average price of a home dropped by 1.7% in May from the previous month, to £218,902, according to Nationwide, one of the UK’s largest mortgage lenders. This comes after April’s gain of 0.9% and is the biggest monthly fall since February 2009, when the average cost of a home was £147,746. The annual growth rate slowed to 1.8%, down from 3.7% in April and the slowest since December. In early 2020, before the coronavirus pandemic struck the UK, the housing market had been gathering momentum after the general election as confidence returned to the market. But the “Boris bounce” was expected to be short-lived because of uncertainty around the Brexit process. The nationwide lockdown imposed by the government on 23 March to contain the Covid-19 pandemic brought the housing market, and the wider economy, to an abrupt standstill. House moves were banned apart from those that were “reasonably necessary”, estate agents were banned from listing new properties and househunters were only allowed to conduct virtual viewings. After seven weeks of lockdown the housing market reopened in mid-May. Data from HMRC showed residential property transactions were down 53% in April compared with the same month in 2019. Nationwide said potential buyers were now planning to wait six months on average before entering the market, and 12% of the population had put off moving because of the lockdown. The lender said about 15% of people were considering moving as a result of life in lockdown, with a third stating they thought differently about their home, especially the importance of a garden and more indoor space. But 22% of people were considering improving their home instead. The EY Item Club economic forecasting group predicts house prices will fall by about 5% over the next few months. Its chief economic adviser, Howard Archer, said: “Housing market activity is likely to be limited in the near term … Many people have already lost their jobs, despite the supportive government measures, while others will be worried that they may still end up losing theirs once the furlough scheme ends. “Additionally, many incomes have been affected. Consumer confidence is currently at or near record low levels and many people are likely to remain cautious for some time to come when making major spending decisions such as buying or moving house.” Robert Gardner, Nationwide’s chief economist, had forecast zero house-price growth for 2020 before the pandemic struck. He said: “It is too early to forecast what the long-term effects of the outbreak on the economy and house prices will be. “However, the raft of policies adopted to support the economy should help ensure the impact on the housing market will ultimately be less than would normally be associated with an economic shock of this magnitude.” Gardner said Nationwide’s ability to generate the house price index was unaffected so far as sample sizes remained sufficiently large to generate robust results. However, he admitted that low transaction levels may make gauging price trends difficult in the coming months, especially for regional indices. The Office for National Statistics has suspended its official house price index because of insufficient data.

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