UK house prices drop for third month running as coronavirus bites
UK house prices fell for the third month in a row in May as coronavirus continued to plague the property market, according to a closely watched gauge.
However, the drop slowed compared to April. Prices fell 0.2 per cent month on month in May, the Halifax house price index showed. This compared with a 0.6 per cent drop in April.
A gauge from Nationwide this week said that house prices plunged by 1.7 per cent in May, however.
Halifax said: “It should still be noted that with a limited number of transactions available, calculating average house prices remains challenging and increased volatility is to be expected.”
The Halifax measure said that house prices had fallen 0.5 per cent quarter-on-quarter. This will please first-time buyers but is bad news for owners, property firms and speculators. Halifax said the average UK house price was £237,808 in May.
Halifax said that activity showed signs of picking up in May, however. The market was completely frozen in April by the coronavirus lockdown.
Howard Archer, chief economic adviser to the EY Item Club, said: “The housing market was essentially at a standstill from late-March through to mid-May.” The government had advised homebuyers and renters to delay moving as much as they could.
Archer said: “The lockdown introduced on 23 March meant that no visitors were allowed to visit properties.” He noted that this included “estate agents and surveys as well as potential buyers”.
Will UK house prices fall further?
The government relaxed some of the coronavirus restrictions in England in the middle of May. This included allowing viewings of houses to resume, as well as construction work.
“The mid-month relaxation of restrictions in England… brought much-needed positive news,” said Russell Galley, managing director at Halifax.
Property website Zoopla reported an 88 per cent rise in online demand after the restrictions were eased. It said this was likely because of a large build-up while the property market was suspended. Zoopla said it will probably lessen in the coming weeks.
Despite this, many analysts have said they expect UK house prices to tumble further this year. Millions have had pay cuts or lost their jobs and have lost their appetite for big-ticket purchases.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: “We look for a five per cent decline in prices.”
Yet Galley said: “We expect market activity to increase progressively as restrictions are eased further across the whole of the UK.”
He added: “We continue to have confidence in the underlying health of the housing market over the long-term.”
Market may remain subdued
Yet in the medium term, things are set to deteriorate further for UK house prices. That is according to Jonathan Hopper, chief executive of Garrington Property Finders.
He said the Halifax figure “provides an early hint of the sharp price correction to come”.
“At this stage both buyers and sellers are feeling their way on price, and caution will be the watchword for both.”
Archer of the EY Item Club agreed with Tombs. He said there would likely be a five per cent drop in house prices.
“Despite the easing of restrictions on the housing market, we suspect that the upside to activity may be limited for some to come,” he said.