UK house prices fall for first time since 2012 amid coronavirus
UK house prices posted an annual fall for the first time since 2012 in June amid the coronavirus pandemic, according to Nationwide’s index today.
Growth turned negative last month with prices slipping 0.1 per cent year on year, following a 1.8 per cent climb in May, Nationwide said.
Its data showed UK house prices also dropped 1.4 per cent month-to-month, following a 1.7 per cent decline in May.
That left the average UK house price at £216,403.
Nationwide said it was the first time UK house prices have turned negative since December 2012.
“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,” the bank’s chief economist, Robert Gardner, said.
“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.
“Housing market activity also slowed sharply as a result of lockdown measures implemented to control the spread of the virus.”
Property transactions have improved from April’s low, but the latest HMRC data for May shows they were still 50 per cent lower than the same month in 2019.
UK house prices ‘prove resilient’ despite drop
Lucy Pendleton, founder of James Pendleton estate agents, said the numbers were remarkably resilient given the scale of the economic crisis.
“Prices are down by a whisker annually but what is remarkable is how soft a landing the market has had given the scale of the disaster that has unfolded in the past few months,” she said.
“Nationwide’s reading of the situation is totally in line with recent indications that the prices being achieved on the doorstep have slipped to two or three per cent below asking prices,” she added.
“June was the first full month of trading since the property market came back to life post-lockdown and these sellers will be those highly motivated to move through necessity. That pool of vendors will shrink rapidly and that could put a floor under prices.”
Economists have warned the UK faces a deeper recession than the 2008 financial crisis due to the coronavirus pandemic.
The latest economic data showed UK GDP slumped 2.2 per cent in the first quarter of 2020, its worst fall in 41 years. And worse is expected for April to June, with lockdown in full force.
When will UK housing market recover?
But Pendleton said the strength of UK house prices will really be tested when the government’s furlough scheme ends in October.
Online estate agent Yopa’s chief property analyst Mike Scott said a return to normal could bolster UK house prices, but that could be a long way off.
However, with unemployment set to spike when furlough ends he admitted it is hard to predict where UK house prices go next.
“[The] fall in average prices may be reversed when the market gets back to more normal activity levels, which will take several more months,” he said. “Or it may be a longer-term trend caused by increasing unemployment, the withdrawal of many mortgage products and a loss of market confidence. This is an unprecedented situation, and so only time will tell what the housing market will look like by the end of the year.”
CEO of property investment fund FJP Investment, Jamie Johnson, said all eyes are now on the timescale for a UK recovery.
However, with Leicester plunged back into lockdown over a spike in cases, he warned UK house prices could face more pressure.
“We need to be realistic. A second outbreak of coronavirus cases and reintroduction of lockdown measures is a distinct possibility and could result in a second retreat of buyers and sellers from the market,” he said.
“The market is clearly waiting for further assurances that Covid-19 has passed before making a fully-fledged return. Based on recent events, this might not be as early as initially anticipated.”
Lockdown bites value of British homes
Howard Archer, chief economic adviser to the EY Item Club, said today’s data shows the impact of the lockdown on house prices when the government told Brits to stop looking for homes.
“The housing market was essentially brought to a standstill from late-March through to mid-May by the lockdown,” he said. The lockdown stopped people from visiting properties while stay-at-home measures were in force.
Archer also pointed to Bank of England data on mortgage approvals showing they fell to a record low of just 9,273 in May, far off March’s count of 56,145.
“While relief for the housing market in England came from the easing of restrictions in England on 13 May, this evidently occurred too late to lift mortgage approvals for the month,” Archer added.