The lockdown imposed to curb the spread of the Covid-19 pandemic has frozen the housing market, according to Home.co.uk’s Asking Price Index for April.
With estate agent offices closed until further notice, new listings have, essentially, fallen off a cliff. Meanwhile, price movements during this period are ‘meaningless’ and predictions of falling prices are ‘premature’.
This comes just after market sentiment was significantly positive; confidence was returning, prices were rising over and above seasonal expectations in all regions and momentum was returning following the long impasse over Brexit.
Only a month ago, the London market had just recovered from several years of price correction and looked set for considerable growth.
The mix-adjusted average home price for England and Wales had risen to 1.8% year-on-year – the highest growth seen for two years – but has now dropped to 1.0%. However, Home.co.uk says this is not representative of any real change in property values.
Pre-pandemic low stock levels and low supply were the key drivers in both the sales and rental markets, which is now expected to worsen.
The total stock of property for sale in England and Wales has now dropped 13% year-on-year, and ‘panic-stricken’ London is the worst hit again with 43% less property entering the market in March compared to March 2018.
Low and falling stock levels also characterise the private rented sector (PRS). The lettings market current has 14% less stock than a year ago and 21% fewer new rentals entering the market.
Home says this squeeze in supply is having a dramatic effect on rents in many regions. In the Greater London area, for example, rents are now up 9% year-on-year and some boroughs are seeing annualised hikes of around 20%.
However, for the time being, both supply and demand have essentially ceased, and will return once the pandemic has ended. Demand, being chiefly credit-based, is forecast to return more quickly but the resurgence of supply may well be slower and start from very low levels.
Although it is unknown when the market will have the all-clear to proceed, when it does, the imbalance between future supply and demand will have clear implications for significant upward price adjustments.
Investors burned by the stock market will be looking for safer investments post-pandemic which will, in turn, boost demand even further.