House prices could take nearly a year to recover from the fallout of the coronavirus pandemic, the UK’s leading property professionals have warned.
A Royal Institution of Chartered Surveyors report said that 80 per cent of its member agents had seen buyers and sellers pull out of property deals during lockdown.
Last month, the Rics called for a stamp duty holiday to be introduced for buyers to get the property market moving again and it reiterated that with a call for stamp duty to be permanently reduced or scrapped stamp duty for downsizers in a bid to ‘kickstart market fluidity.’
Member estate agents said they expected house prices and sales to fall in the months to come, 40 per cent said they expected property values in the newly-reopened market down by at least 4 per cent.
Expectations: Property price predictions for the Rics for the next year
Since restrictions were lifted by the Government earlier this week, estate agents are now free to open, non-essential moves can take place and surveyors and housebuilders can get back into business again.
Around 450,000 property transactions have been left in limbo since lockdown, the Government’s Housing Secretary Robert Jenrick said at the daily Covid-19 briefing on Wednesday.
But, with many potential buyers still fearful of Covid-19, a string property companies are now moving to online virtual house tours or implementing strict social distancing rules for in-person viewings.
The use of hand sanitiser and regular handwashing is being advised for house hunters who are interested in viewing a property in person.
In fresh findings today, the Rics said that while property sales levels could take nine months to recover, prices will take around eleven months to get back in gear again.
Green light: The Government has given the housing sector the green light to get moving again
Sales: Expectations of property sales levels in the UK for the next 12 months
Last week, the Bank of England said it thinks house prices could fall by 16 per cent as a result of the pandemic, while estate agent Knight Frank believes prices will drop by around 7 per cent this year.
House price forecasts
Bank of England: Fall of 16%
Cebr: Fall of 13%
Savills: 5 to 10% fall on thin sales
Liberum: Fall of 7% in real prices
Lloyds Banking Group: 5 to 10% fall
EY’s Howard Archer: Fall of 5%
Knight Frank: Fall of 7%
Recent figures from UK Finance revealed that one in seven mortgage holders has already taken a payment holiday due to the pandemic.
With interest rates at rock bottom, this predicted cut in property prices could spell good news for potential buyers willing to take a punt in the market. But, stock levels look set to continue being a problem for buyers.
Around 35 per cent of property professionals surveyed by the Rics said they think house prices could be left up to 4 per cent lower on the re-opening of the market, while more than 40 per cent believe prices could fall by an even greater amount.
As far as prices are concerned, following a run of three successive months of positive readings, the Rics’ headline house price balance fell into negative territory with a net balance of -21 per cent of respondents noting a drop in prices.
Four-fifths of surveyors said they have seen buyers and sellers pulling out of transactions due to the coronavirus pandemic.
An overall net balance of 92 per cent of surveyors saw the number of sales being agreed fall rather than rise last month.
Meanwhile, a net balance of 96 per cent reported a drop rather than an increase in new properties coming on the market, marking the weakest reading since this question started being asked in April 1999.
Prices through time: A chart showing what has been happening to house prices since 1995
Lettings: Demand from tenants in the lettings market has slumped in the past month
In the lettings market, rents are expected to fall across the country over the next three months, but stabilise in about a year’s time.
In five years’ time, rents are expecting to be increasing by around 2.5 per cent a year, while house prices are expected be increasing by around 2 per cent annually, the Rics said.
Simon Rubinsohn, chief economist at the Rics, said: ‘Not surprisingly, the latest survey shows that housing activity indicators collapsed in April reflecting the impact of the lockdown.
‘Looking further out, there is a little more optimism but the numbers still suggest that it will be a struggle to get confidence back to where it was as recently as February.
‘Moreover, whether this can be realised will largely depend on how the pandemic pans out and what this means for the macroeconomic environment.’
Last month, the Rics called on the Government to dish out a stamp duty holiday for buyers to ensure the property market gets going again.
Over 60 per cent of respondents to the Rics’ latest survey for professionals think a stamp duty holiday would help sales recover.
Hew Edgar, head of UK government relations, said: ‘Rics last month called on the UK Government to explore confidence-boosting measures for the residential market as it reopens, and the data suggests that our proposal for a stamp duty holiday would be a successful change that would boost transactional activity, helping people move home.’
Today, the Rics suggest the Government could go a step further on the stamp duty front.
Mr Edgar said: ‘There are, of course, other options available to Government as they reopen the market, notwithstanding stamp duty options such as reducing or removing stamp duty for downsizers that would kickstart market fluidity, and we look forward to continuing conversations as the market starts to move again.’
One estate agent summed up his experience of the pandemic succinctly to the Rics. Chris Philpot, an estate agent at Lacy Scott and Knight in Suffolk, said the situation had been fraught with ‘frustration, furloughing and from home.’
Construction sites could be open until 9pm at night
On Wednesday, the Government’s Housing Secretary Robert Jenrick used the daily Covid-19 press briefing to spell out his plans to get the housing market moving again.
Jenrick said the Government was planning to introduce a ‘first homes programme’ for later this year, which will offer a 30 per cent discount for key workers.
He also said he wanted the construction of homes to be ‘up and running’ and would be ‘announcing further steps for safe house building.’
The Housing Secretary said he would allow ‘more flexible working hours where appropriate.’
Housebuilding construction sites can apply to extend their working hours to 9pm Monday to Saturday in residential areas, with Jenrick adding that this should be approved by local councils unless there are ‘compelling reasons’ not to do so.
He said the housing market had been ‘key’ to economic recovery in the past.
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