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As we all move towards the 2020 summer and the UK edges slowly out of lockdown, many are asking what the near-term future holds of the property market. Certainly, March and April saw a near-standstill in buyer and seller activity across the country, with some transactions able to go ahead using video-inspections and other innovative methods by estate agents. As the housing market slowly creaks back into movement, can homeowners and prospective buyers look ahead with more optimism in 2020? Or, are house prices set to go down and recovery far away?
Here at Cedar House, we offer some initial thoughts on this important subject, recognising that the situation is still highly volatile and the current conditions could dramatically change as news develops about COVID-19, lockdown measures and the possibility of a vaccine coming forth. We hope you find value in this content and invite you to contact our financial advice team here at Cedar House for more information, or to access personalised advice:
020 8366 4400 or enquiries@cedarhfs.co.uk
Short-term indications
Many people have been deeply frustrated since late March, with 450,000 buyers and renters prevented from moving house due to lockdown measures. In June 2020, however, there have been some encouraging signs of early recovery in the UK housing market.
Currently things are still moving very slowly. Indeed, due to the low volume of house sales currently taking place – as well as movement restrictions presenting data gathering – the Office for National Statistics (ONS) is unable to accurately gauge average house prices at the present time. However, the UK government has officially announced that buyers and sellers can resume all activities involved in the sale or rental of a property.
Valuations and viewings have been allowed to take place since mid-May 2020, although public nervousness about going outside and meeting prospective buyers/sellers has certainly inhibited a rapid resumption in normal levels of transaction activity.
What is the “worst-case scenario”?
Whilst most will welcome the news that house viewing, valuations and sales are coming back to life, the situation with COVID-19 still remains highly uncertain. What if there is a “second wave” in the UK over the coming week or months, and the country becomes locked down again – perhaps even more strictly than it was before? What effect might this have on property markets?
Naturally, many people want to understand what the “disaster scenario” might be for housing in 2020 and how likely this is. Over recent months, there have been varying predictions about a fall in UK house prices as we approach the summer. Capital Economics has stated that it expects a 2% fall across the UK in 2020, whilst others such as Savills predict 5-10% falls in the short term. One of the most dire forecasts has emerged from Lloyds Banking Group, which says falls could be as high as 30.2% between now and 2023.
Few forecasters are predicting a rise in house prices any time soon. Yet it is still too early to tell exactly how the housing market will behave in 2020. At this stage, the “disaster scenario” of a near-30% fall in prices seems premature; even Lloyds Banking Group has distinguished this “doomsday outcome” from a Base Case scenario of 5% house price growth in 2021, and an Upside Case of 6.8% growth in the same year.
Longer-term prospects
Much depends, of course, on how the world economy reacts to the continuing developments surrounding COViD-19 as well as UK government policy. A “stamp duty holiday”, for instance, could help to spur transaction growth, although such a policy appears to be unlikely as the UK government wrestles with ways to bring in more revenue to pay for the “Budget handouts” in March 2020. Based on the current data, it does seem that a swift recovery in the UK property market is unlikely. Rather, a slow and gradual movement towards some form of normality seems to be more plausible. However, nothing is certain and a sudden development (e.g. the discovery of an effective vaccine against COVID-19) could dramatically transform the situation, reigniting consumer confidence and transactions.
What should buyers and sellers do now?
For first time buyers, many might be wondering whether it’s a good idea to wait a bit longer prior to making a purchase. After all, if house prices could fall further, perhaps a better deal could be just a few months away? At Cedar House, we understand such thinking but would urge caution. Remember that UK property forecasters have often been wrong in the past, and assuming a fall in house prices could, in fact, not transpire. In which case, perhaps you miss out on a great opportunity to buy now (whilst the market is still open!). Each property and potential sale or purchase needs to be judged on its own individual merits, of course, with your wider financial goals and strategy in mind. Here, consulting an experienced adviser can bring a lot of clarity.
Invitation
If you would like to discuss your financial plan with a member of our team, then get in touch today to arrange a free consultation:
020 8366 4400 or enquiries@cedarhfs.co.uk.