The market has all but ground to a halt due to restrictions in place to stop the spread of the virus, with lockdown preventing would-be buyers from attending viewings. The Fiscal Policy Panel, which advises the government on economic matters, is forecasting a 10% drop in property prices in 2020 – a 15.4% swing on projections made for this year in October, when the panel predicted a rise.
Roger Trower, chief executive of Broadlands Estates, said he had not seen anything like the current scenario since he became part of the firm in 1982.
But he stressed that although there would be a slow-down, it would not last.
‘I genuinely believe the housing market is affected purely by the lack of physical activity – we cannot move around. But supply and demand will not change and that is the major driver,’ he said.
‘Money is cheaper now – the Bank of England dropped its interest rate to 0.1% – and there are lots of properties ready to go again when the whistle blows.’
Asked about the FPP’s projections, Mr Trower said: ‘If there is any drop at all in anything, I am sad to say it will be media driven. How can they [the Fiscal Policy Panel] substantiate that sort of thing? Money is cheap, there are people with cash ready to buy and there are people still working who will be ready to go when this situation relaxes.
‘We have seen the stock market shoot up already. The housing market will not crash.’
The Fiscal Policy Panel said in its report that they were expecting a ‘sharp slowdown in the housing market with a very limited number of sales during the peak of the outbreak and for some time after’.
The group is forecasting the number of housing transactions to drop by 53% on October 2019’s forecast. However, it is predicting a rise in sales next year (45%) as buyers/sellers look to make up for lost time.
The FPP also said that house prices could increase at a faster rate from 2021 than previously expected – by 5% in 2021 (a 0.5% rise on October 2019’s projections) and 4% in 2022 (0.4% rise on October’s predictions) – as the sector begins to recover.
Peter Seymour, managing director of the Mortgage Shop, said the market had ‘understandably’ ground to a halt, but added that there would be ‘pent-up energy’ among would-be buyers who were less economically impacted by the Covid-19 restrictions and who would be ready to buy once the crisis subsided.
‘I think that a fall in property values is now going to be inevitable,’ he said.
‘Whatever happens, when this crisis ends, people will be needing to transact to put a roof over their heads. Very sadly, property is going to have to be placed on the market due to forced sales, and this might cause a medium term glut and reduced prices as a result.
‘Exceptionally low rates of interest will help to act as an incentive, although this will be tempered by the fact that lenders are likely to be less generous post crisis in respect of income multiples.
‘We have to watch that the pent-up energy among would-be buyers is not is dampened down by any restrictions or modifications with regard to lending criteria. I believe there will be some changes and income multiples will be affected.’
