As the drastic effects of the global pandemic continue to unfold, many of the market sectors are currently evaluating the impact that COVID 19 has had to date and will continue to analyse data in the forthcoming months. Property buyers at WeBuyAnyHome have recently completed a study of the property industry; drawing comparisons between January - May 2020 with the same period in 1919. They published their findings in early September and the report makes for gloomy reading.
Where Has the Housing Demand Dropped the Most?
In the report, WeBuyAnyHome, states the stark figure of a drop of 33% because of the pandemic in UK sales house sales demand compared to the 2019 figures. The study looked at a variety of locations and across the board there have been 76.5% fewer house sales inquiries. The least hit country was Scotland which recorded -12.09%, in contrast with the most badly hit area – Northern Ireland with -76.54%. England is currently seeing a drop of -33.91% in the number of house enquiries and Wales, 35.9%.
Interestingly, the report also explored the figures for individual areas, trying to link the higher negative percentages with the number of coronavirus cases. Whilst this could well be understood in Dundee and Tyrone, where the number of house sales enquiries have dropped by -100% and the areas have had high and medium rates for coronavirus respectively, Norfolk has had -51.46% enquiries and yet has been a medium area for the virus.
Where Has the Housing Demand Increased the Most?
Not all areas have registered a slump in enquiries. WeBuyAnyHome reports that many places north of the border are doing well, with Clackmannanshire enjoying an increase of 112.50% and Stirlingshire one of 100%. The study also examines the demographics of the property sellers and not surprisingly, it was found that there had been an increase in affluent and older families rather than early stage families, supported families and well off adults. The key reasons for this can be linked to coronavirus and job uncertainty and furlough schemes which have impacted many young professionals.
People in these groups do not/cannot commit to house purchase until their future is more settled. Indeed, although some buyers are being tempted by the government’s ‘stamp duty holiday,’ because no one has ever known such a situation with the pandemic, many are being extremely cautious and will continue to be so, with the prediction of a second wave already unfolding and government discussions continuing about whether to extend furlough schemes further.
How are house prices faring at this time if there is such a slump in house sales enquiries? The Nationwide Building Society house price index showed that house prices fell 1.7% from the previous month in May 2020, followed by a further 1.4% in June – the largest decline in 11 years, since the financial crisis of 2009. These consecutive falls in house prices mean that prices are 0.1% lower than they were at the same time last year – across the country. This is the first annual fall since 2012. Property analysts said at the time, that whilst the figures looked bad, there were no indications that there would be a full scale collapse like the one during the recession in the early 1990s.
How Has Coronavirus Changed Property Prices?
These figures have sent shockwaves through the property sector, Robert Gardner, who is the Nationwide's chief economist, has explained:-
"It is unsurprising that annual house price growth has stalled, given the magnitude of the shock to the economy as a result of the pandemic. Economic output fell by an unprecedented 25 per cent over the course of March and April – almost four times more than during the entire financial crisis".
Gardner did continue with optimism - "There are some signs this is starting to stabilise". He explained that this is because the current situation is not a typical economic downturn.
The most reliable barometer of house prices is the Land Registry’s UK House Price Index. The index was suspended during the lockdown period, but has now published delayed figures for May 2020 showing a 0.3% month-on-month drop in house prices but a 2.9% year-on-year rise in prices.
As The Land Registry regains its lost ground, many property experts will be interested to see the scheduled report it will publish on 21 October as it will give a much clearer indication of what has really happened to house values.
How Have House Prices Faired on the Rightmove House Price Index?
Interestingly, as the daily papers reported an increase in the number of property enquiries over the summer – and sales to buyers wanting to save on stamp duty – the figures for August do look more hopeful. Rightmove the property portal, maintains its own index (which is based on asking prices, rather than the more accurate ‘sold’ prices) and has reported a 0.2% month-on-month drop in house prices during August. Nationwide’s index (based on mortgage lending) however reported a 2% month-on-month rise in house prices, whilst the Halifax (whose index is also based on lending) reported a somewhat surprising, 5.2% increase.
Certainly in areas where demand outstrips demand, there is an increase in interest and more property enquiries and sales, but the market is far from stable at present as the UK government, like so many others, has had to put much of the economy on hold for the time being. The government also put in place a raft of measures to support both families and businesses and these included the furloughing scheme which could be coming to an end.
As people feel confident that they are in a financially secure position to be able to start looking at the property market, many will do so- but with a new agenda. COVID-19 has forced many people to work from home and has revealed that many can work as well – if not better- from home and this could well change work patterns permanently. Experts predict that there will be a significant rise in the number of people searching for 'safer' properties that are further from town and city centres and ones with larger gardens and outdoor space as well as a room suitable for a home office. Interesting times ahead.