The UK saw its property prices fall annually for the first time since 2012 as the harsh realities of the coronavirus pandemic hit home.
The average across the UK’s regions was 0.1% lower in June of this year than they were in 2019 – the first annual drop in eight years.
The slump has decimated the industry since the pandemic really gathered pace in March, and the building society Nationwide has confirmed that house prices in June were also 1.4% lower than in May.
The main issue during the lockdown period was that property viewings and house moves were scrapped in April and May as COVID-19 peaked, and uncertainty in the jobs market has also played a part in the downturn in demand.
“The property market was never going to get through such a profound economic shock without taking a material hit,” said the managing director of the mortgage firm Coreco, Andrew Montlake.
“The second half of 2020 is going to be the real test for the property market, as government support for workers is slowly removed and we see a rise in unemployment. The government and Treasury are going to be tested like never before as they seek to keep people in jobs, which will clearly be pivotal to the future direction of house prices.”
London Properties Could Lose £90k in Value
The rather stark predictions from the Office for Budget Responsibility suggest that the average UK property will lose £30k in value over the next couple of years – in London, this figure is a staggering £90k.
The prediction is for a 2.4% fall by the end of 2020, and then next year will see a plan-breaking loss of a further 11.7% according to the same statistics.
The average home in the UK is worth £230,000 at the time of writing, but that could slip to £200,000 by the end of 2021. In London, there would be a drop off from an average of £605,000 to £515,000.
“Though only a small decrease, it is notable as the first time since 2010 when the housing market was struggling to gain traction following the shock of the global financial crisis, that prices have fallen for four months in a row,” reports the managing director of the Halifax bank, Russell Galley.
Stamp Duty Holiday Sparks Mini Revival
One of the rescue packages outlined by the Chancellor, Rishi Sunak, to stimulate the UK economy was a temporary stamp duty holiday that will last until next March.
It was a welcome move, because while viewings can now be arranged and sales completed, there is largely a reticence among the population to buy a new home given that job prospects and income are uncertain at the moment.
That said, properties in the £400k-£500k band – the very top-end of Sunak’s stamp duty offer, have seen plenty of activity in pockets of the country.
Rightmove, the premier property portal in Britain, has said that there has been a 49% increase in enquiries since the Chancellor made his announcement, and that the bulk of those have come in the south of England and in that value band mentioned.
The most searched areas are found in regions in close proximity to London, including Chelmsford, Bromley and Swindon, while Borehamwood and Caterham – in Hertfordshire and Surrey respectively – saw an increase in interest of 38% and 41%.
The director of Rightmove, Miles Shipside, said: “The uplift in enquiries is likely a mixture of people looking in new areas to see what they can now afford, changing their search criteria to bigger, slightly more expensive homes, and new movers coming into the market because they now have enough extra budget to move home.
“The savings of £15,000 on property above £500,000 may also help some people to trade up more easily. Our analysis shows that this is going to help the mid-market the most.”
Milton Keynes is another region where there has been a spike in interest, and Joe Frost of local firm Alan Francis said: “We’re busier than ever. It has been incredibly buoyant since the stamp duty announcement. We had one person complete the day after and save £15,000, so they were very happy.
“It also means people are keeping their prices firm – prices are perhaps not as negotiable as they were before.”