Activity rates across the UK housing sector have fallen significantly as a result of the lockdown in the last few weeks, with most parts of the market put on hold. Property buyers like that of zoom property buyers are still facilitating customers through online viewing mid the crisis. That was reflected in the RICS survey of March, which is historically a strong lead indicator. Unsurprisingly, in a market where physical house viewing has become difficult, the study reveals that 87 percent of surveyors saw new inquiries fall, and 86 percent saw new instructions for sale fall. This represents the lockout effect on the essential conveniences of buying and selling homes.

It also indicates that buyers and sellers are placing their plans on hold at the same time, meaning that there is no disconnection between the rates of supply and demand that might lead to a significant change in house prices. The same survey recorded that more surveyors witnessed price rises than price decreases in March, reflecting the consumer optimism that had prevailed since the general election.

Impact by COVID-19

In addition to the physical limitations, the dissemination of COVID-19 has had an immediate effect on consumer sentiment, with the GfK consumer trust index dropping to rates that have not been seen since the Global Financial Crisis (GFC). Any buyers who manage to stay involved are faced with a limited mortgage market. Many lenders have limited their mortgage bid to merely lower value-for-loan items. It also reduces their exposure to the possibility of falling rates and decreases the number of new loan applications. At the same time, borrowers face high rates of requests to process holiday mortgages.

The speed of recovery from the expected short sharp shock will rely on its duration and the effectiveness of government actions to reduce its economic impact. Currently, we foresee transactions dropping to 20%-40% of the five-year average by 2020 and rising to 60%-80% by January 2021. This general opinion is held by RICS survey respondents, 88 percent of whom said they anticipated a decrease in sales volumes over the next three months. Still, only 60 percent anticipated a decline over the next 12 months.

We also expect short-term price declines of -5 percent to -10 percent, assuming that the economic downturn is short and sharp and that there is no major disconnection in the housing market between supply and demand. But the economic landscape is changing rapidly, and as things change UK house prices have started to rebound from volatility triggered by Brexit at the end of 2019, we’ll be publishing daily briefing notes.

And the so-called Boris bounce from the Tories’ December election victory set up the market for a good start to 2020.

In the first reassessment of the housing market by one of the big forecasters, Knight Frank said that the number of house sales in the UK would decline from 1,175,000 last year to just 734,000 this year.

Many of the “closed” sales will not be carried forward to next year, spelling disaster for estate agents and other property chain firms – from valuers to removals firms – that depend on their business transactions.

But the consultancy does not expect house prices to crash, which started to recover in the early part of 2020 before coronavirus took hold.

It predicts that UK house prices in the mainstream will fall 3 percent in 2020, but then bounce up by 5 percent in 2021. Behind the Knight, Frank predictions is an expectation that in 2020 the Uk economy will contract by 4 percent until it rises by 4.5 percent next year as the pandemic recedes.

Liam Bailey, Knight Frank’s global head of research, said: “In January and February the housing market was in a good spot. There has been a sharp rise in revenue and demand inflation in the UK, with even the largest central London sector seeing a five-year drop in prices reversed.

“We [now] have to expect slower economic growth in the first half of 2020, job-market dislocation and weakening consumer confidence will affect prices – but the relatively short period of the crisis means declines will be minimal.” The agency only predicts rents for Prime Central London and expects them to be stable in 2020, increasing by 3% next year.

At the end of last week, the national building society released its monthly house price index, showing a surge of over £3,000 on the average home price in Britain in March, the quickest rate for two years. But it stressed that since then, the lockdown on the market has not been taken into account and that “housing market activity has been halted.”

Estate agents are claiming everything but the failure of their companies. Lucy Pendleton of agents James Pendleton said: “We had been forced to furlough more than half of our workers long before an outright housing market freeze was announced. Last week, the number of transactions accepted decreased by 84.2 percent per year, exchanges decreased by 66.6 percent, the volume of deals decreased by 70 percent, and viewings ceased.

But then coronavirus came along, sending the UK into lockdown – ensuring buyers couldn’t visit homes, a relatively critical move when moving house.

The sudden economic hit has also made people warier about making major buys right now. Although the effect of the coronavirus outbreak on UK house prices is still not well known, analysts expect they will dip in the second and third quarters of 2020.

The new analysis released this week by Rightmove found that this month’s average property price was down 0.2 percent to £311,950. In comparison, UK house prices rose by 2.1 percent in April last year. The property platform said that due to the coronavirus shutdown, there is no “functioning [housing] market” and that new sales are “nearly impossible.”

Meanwhile, figures released this week by the Land Registry and the National Statistics Office have shown that inflation dropped back to 1.1 percent in February after rising to a peak of 1.5 percent in January of eight months.

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