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Coronavirus impact on UK house prices 'limited and short-lived'

Tom Belger
Finance and policy reporter
Homes in Ramsgate, England.(Richard Baker/In Pictures via Getty)

UK house price growth stagnated in March when the coronavirus first began to ripple through the property market, new figures show.

Some experts say it is too early to confidently forecast the long-term impact of the coronavirus on prices — but others are predicting only a short-lived and limited drop.

The average cost of a UK property sold last month was just over £240,000 ($295,170), no change on the previous month, according to lender Halifax and IHS Markit.

It marked the first month prices had not risen since October, amid heightened economic uncertainty as the outbreak began to spread in Britain.

Read more: Steepest downturn in UK construction as COVID-19 hits industry

But the data largely reflects sales agreed before the pandemic began to cripple the UK economy and an unprecedented lockdown paralysed most property market activity. The government has now urged against all but essential house moves.

Some experts suggest house price data is increasingly unreliable and irrelevant in the current climate. With sale numbers falling sharply, Halifax itself admitted calculating average prices would become more challenging.

“With no sales data and no history of this sort of event happening, all it is is guesswork. Right now, we should all be thankful for our homes as a place to shelter and protect our family,” said Ben Johnson, director of off-market property app Houso.

Many estate agents are still taking punts however. Some expect price growth to continue to stagnate or go into reverse. Knight Frank forecasts released on Tuesday predicted a 3% decline in 2020.

Read more: New mortgages hit six-year high just before coronavirus struck

“A sudden freeze in market activity of this proportion will start to impact price growth notably as the months go on,” said Colby Short, CEO of estate agent comparison site GetAgent.

Paresh Raja, CEO of lender Market Financial Solutions, also said current forecasts suggested a significant drop-off from recent growth. But he said he was optimistic that any decline would be “momentary.”

There is a confidence among many estate agents that the downturn may only last as long as the lockdown however. Strong pent-up demand after years of Brexit uncertainty and cheap credit are expected to continue to push up prices once government restrictions lift.

Read more: Purplebricks to furlough staff as market paralysed

Marc von Grundherr, director of London estate agent Benham and Reeves, said a freeze in activity by buyers and sellers alike should limit the impact on prices.

“We can rest assured that once the market does spring back into action, the green shoots of strong growth seen earlier in the year will start to bloom and the outlook will be much brighter,” he said.

The upbeat predictions come in spite of widespread warnings the UK faces one of the worst recessions in modern history as the lockdown hammers the economy.

Lay-offs and benefit claims have spiked, household spending has shrunk and some banks have tightened lending rules, which could all hit buyer demand.

A survey by online mortgage broker Trussle also appears to show buyers’ appetite for moves being hit harder than sellers. It found almost half of Brits surveyed who were looking for a home last month decided to delay because of the pandemic, compared to just one in five of those looking to sell.

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