House sales in the UK will collapse this year as the coronavirus pandemic puts the property market into deep freeze. But prices will fall by only 3% and will rebound next year, according to global consultancy Knight Frank.
In the first reassessment of the property market by one of the major forecasters, Knight Frank said the number of house sales in the UK would plummet from 1,175,000 last year to just 734,000 this year.
Many of the “lost” sales will not be carried forward to next year, spelling disaster for estate agents and other firms in the property chain – from valuers to removals companies – that rely on transactions for their business.
But the consultancy is not predicting a collapse in house prices, which were starting to revive in the early part of 2020 before coronavirus took hold.
It forecast that mainstream UK house prices would fall 3% in 2020, but then bounce back by 5% in 2021. Behind the Knight Frank forecasts is an assumption that the British economy will shrink by 4% in 2020 before growing by 4.5% next year as the pandemic recedes.
Liam Bailey, the global head of research at Knight Frank, said: “The housing market was in a strong position in January and February. A sharp uptick in sales and price growth was seen across the UK, with even the prime central London market seeing a reversal of a five-year-long price decline.
“We [now] have to expect weaker economic activity in the first half of 2020, the dislocation in the jobs market and weakened consumer sentiment will impact on prices – however, the relatively finite timespan of the crisis means declines will be limited.”
The agency only forecasts rents for prime central London, and it expected them to be flat in 2020, then rising 3% next year.
Nationwide building society issued its monthly house price index at the end of last week, showing a more than £3,000 surge in the average price of a home in Britain in March, the fastest pace for two years. But it stressed the figures did not take into account the lockdown in the market since then, and that “housing market activity is now grinding to a halt”.
Estate agents say their businesses have all but collapsed. Lucy Pendleton of agents James Pendleton said: “Even before an outright housing market freeze was declared, we had been forced to furlough more than half of our staff. Last week the number of sales being agreed was down 84.2% annually, exchanges were down 66.6%, the volume of offers had fallen 70% and viewings had ceased altogether.
“It wasn’t so long ago that commentators talked of Brexit uncertainty putting transactions on ice, but that feels like ancient history now. Covid-19 has brought brutal new meaning to a frozen market.
Pendleton is pinning its hopes on a vigorous bounceback next year: “The housing market will come roaring back to life as soon as the lockdown ends, aided by interest rates that are significantly lower than when it began.”
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