The coronavirus crisis has led to the economy falling into recession, but what does this mean for the housing market?
The UK housing market suffered greatly when lockdown was ordered and businesses were told to shut their doors in March. Without new listings and property viewings, sales negotiations were frozen and the market was paralysed, hit by a 70 per cent decline in buyer demand.
Fast forward a couple of months and things couldn’t be more different…
Mini property boom
The reopening of the housing market and government support led to prices hitting an all-time high in July as things started to return to normal. This was due to a lack of new available houses and pent-up demand. The government’s abolishment of stamp duty for purchases under £500,000 until March 2021 also boosted buyers’ enthusiasm, not to mention the added layer of demand from those whose housing priorities may have changed throughout lockdown.
The number of sales agreed in the UK had been the highest since Rightmove started tracking the figure a decade ago, up by 38 per cent on the same period last year and worth a combined total of more than £78 billion.
Official forecasts say that this will not last and house prices are predicted to fall on average - they typically slow or drop when the economy is performing poorly.
It seems that the pandemic has prompted many people to sell up and move and stamp duty cuts may encourage previously hesitant buyers to go ahead now that there are big savings to be made.
As the recession has not played out in the usual way, mainly due to it being a result of a public health crisis rather than a financial one, it may be that the housing market does not follow suit.
Goalposts have moved for first-time buyers – purchasing a first home is one of the biggest financial steps people will ever take. Changes to the housing market brought on by Covid-19 have made that step a little bigger.
For those saving to afford a deposit, coronavirus may have put an extra strain on their buying power. With the availability of mortgages, loans and other credit squeezed by uncertainty in the economy, deposits of 5 and 10 per cent have become very rare as banks put in tighter rules, such as refusing to lend to furloughed employees.
As the government support comes to an end, the resulting impact on the housing market may become more apparent. We cannot forecast what will happen next, economically or politically, but these factors may prove fundamental to the future of the industry. What we do know is that patience will be required from all involved while we ride the Covid-19 wave.
So, if you’re looking to move to a new house while saving some pennies, why not contact us and see how we can help you? If you’re a first-time buyer, our mortgage advisers can help you find the perfect product.