House prices fall: second consecutive drop in UK property market after coronavirus lockdown

Experts say outlook for property market is uncertain as viewings resume. 
Daniel Lynch

House prices fell sharply for the second month running in June as the impact of the economic slump triggered by the lockdown starts to feed through to the property market.

Lender Nationwide said the outlook for prices remains “highly uncertain” as it revealed that the average value of a home dipped 1.4 per cent in June. This follows a 1.7 per cent drop in May. They are the biggest monthly declines since the financial crisis in 2009.

The consecutive falls means that prices are 0.1 per cent lower than a year ago across the country as a whole, the first annual fall since 2012.

However, property analysts said that while the figures were “bad, perhaps very bad” there were few signs yet of a full scale collapse on the scale seen during the banking crisis or the early Nineties recession.

UK house prices: how does your region compare? (June 2020)

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Nationwide’s chief economist Robert Gardner, said: “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.

Housing market activity also slowed sharply as a result of lockdown measures implemented to control the spread of the virus.”

He added: “With lockdown measures due to be eased in the weeks ahead, housing market activity is likely to edge higher in the near term, albeit remaining below pre-pandemic levels. Nevertheless, the medium-term outlook for the housing market remains highly uncertain. Much will depend on the performance of the wider economy, which will in turn be determined by how the pandemic and restrictions on activity evolve.”

Andrew Montlake, managing director at the UK-wide mortgage broker, Coreco, said: “The June house price data is bad, perhaps very bad, but it was always on the cards.

“The property market was never going to get through such a profound economic shock without taking a material hit.

“The hope is that the buoyant economic support package put in place by the Government will help the market to resurface quickly. The second half of 2020 is going to be the real test for the property market, as Government support for workers is slowly removed and we see a rise in unemployment.”

What will happen to house prices this year?

Jonathan Hopper, chef executive of home buyer agency Garrington Property Finders, said: “So far this is a hard reset for the market rather than a collapse. The gains of the ‘Boris bounce’ seen at the start of the year have been swept away, and the market is transitioning to the ‘new normal’.

“With estate agents across the UK at last able to conduct viewings, both buyers and sellers are feeling their way on price.

“While the full financial impact of the pandemic has yet to feed through into the wider economy, in the property market the mood among buyers is best summed up by the two Cs – caution and curiosity.

“Three months of being cooped up in the same four walls have led many people to consider a move, and to reflect on what they want from their home.”

Lucy Pendleton, co-founder of London estate agents James Pendleton, said: “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.

“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 per cent or three per cent below asking prices on average.

“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.

“The public are repeatedly hearing that GDP has collapsed and we face a worse recession than the global financial crisis but that soundtrack isn’t translating into a house price correction at the moment.

“That kind of resilience would normally be seen as a sign of strength and confidence but we’re going to have to wait for the furlough scheme to end to find out what this market is really made of.”

Guy Harrington, chief executive of lender Glenhawk said: “The Covid-19 pandemic has well and truly brought the UK housing market to its knees. We are in the midst of an unprecedented economic crisis, with consumer confidence at rock bottom. The raft of government measures designed to keep us afloat, coupled with undoubted pent up demand and longer term sectoral tailwinds, may support a V-shaped recovery, but the near-term outlook is highly uncertain.”

Quarterly figures show London prices rising 2.1 per cent in the second quarter of the year, although this reflect deals agreed before or early in the lockdown.