Uncertainty around Brexit has affected house prices in the UK over the last couple of years. However, after the general election in December 2019, some confidence was restored to the property market as the number of sales rose by 12% in January 2020. When the UK government enforced a lockdown at the end of March, the property market effectively froze. In his televised address to the nation, Prime Minister Boris Johnson told the country that people should only go outside for essential supplies, health reasons or to go to work.
Where does this leave those that are in the process of moving or who had planned to move?
The government has advised that there is no need to pull out of transactions if the property being moved into is empty. When a property is occupied, GOV.UK recommends that the moving date should be changed to an alternative date when the stay at home order has been lifted. The government has advised that ‘homebuyers and renters should, where possible, delay moving to a new house while measures are in place to fight coronavirus.’ This advice will extend property chains significantly, making the process of moving even more difficult.
The coronavirus outbreak and the ensuing lockdown has caused problems for all involved in the property market. Some forecasters are predicting that the number of house sales in 2020 will halve and prices will decrease by 10%. The high-street bank Nationwide warned that the property market is already grinding to a halt, just a few weeks after the lockdown was put in place. The state of the market depends heavily on the state of the country’s economy, and with a large number of businesses closing, the economy is struggling to say the least.
What does this mean for mortgages?
It is bad news for those who are looking to obtain a mortgage to buy a house, as some banks are temporarily halting their home loan deals. For example, Nationwide will now only offer home loans to those with 25% equity or more. This step taken by banks effectively rules out first-time buyers and existing homeowners who have minimal equity in their home. As a result, many are struggling to find a mortgage that requires the payment of a financially manageable deposit.
It is hard to say exactly how the coronavirus outbreak will affect the property market in the long term. Combine worries about job security with high deposit mortgages, as well as a ban on non-essential travel, and this results in a frozen property market, for the time being.
Some are feeling hopeful that the damage on the property market is not long-lasting. According to a study by the consultancy firm Knight Frank, house prices are projected to fall by 3% but rebound by 2021. Most importantly, Knight Frank is not predicting a complete collapse in house prices, but that the price of houses will rebound by 5% in 2021.
The impact the virus has on the property market will depend largely on the government’s response to the economic problems the UK is facing, as well as how long it takes for the virus to be effectively controlled.
