Housing transactions to fall 60% as market reacts to Covid-19

Housing transactions are set to drop by as much as 60% over the next three months, as the market reacts to the impact of Covid-19, according to new research by Zoopla.

The property expert’s latest UK Cities House Price Index revealed buyer demand over the seven days to Sunday 22 March was down by 40% on the level recorded the week before, as would-be home buyers “paused on major decisions” amid the unfolding events in the UK and around the world.

Zoopla suggested this means levels of housing demand are now below where they were a year ago, but the tougher restrictions on social distancing announced on Monday by the Prime Minister would see demand fall further in the coming weeks.

Zoopla director of research and insight, Richard Donnell, said: “Covid-19 presents a major new challenge – not just for the housing market but for the UK and global economies. Fifty years of history shows that external shocks have impacted the housing market to differing degrees, largely down to the scale of direct impact on the UK economy.

“The initial impact of external shocks is to reduce consumer confidence and put a brake on housing demand and the number of people moving home, which we can see in our latest figures. Levels of property transactions are typically more volatile than changes in house prices.”

Prior to the coronavirus outbreak, Zoopla suggested the UK housing market had got off to its strongest start for four years. Average annual house price growth was recorded at 1.6% across UK cities in February, up from 1.2% in the 12 months previously, as market momentum gathered pace in the wake of the General Election and house price growth increased, the Index showed.

However, Zoopla announced that it was expecting a fall in demand to culminate in a reduction in sales agreed towards the end of the quarter, and into the summer months.

“We do not expect any immediate impact on prices,” Donnell continued. “Beyond this, the outlook for house prices largely depends upon how the Government’s major package of support for business and households reduces the scale of the economic impact.

“Low mortgage rates mean forbearance will remain the preferred choice for lenders, but further Government support in these unique times cannot be ruled out.
 
“The timing of any rebound in housing market activity depends upon when new restrictions are lifted, and the extent to which households and businesses are able to return to a normal way of life. Browsing for homes online is set to continue and, while demand for property may rebound quickly, it will take several months for agents to rebuild new business pipelines.”

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