New research suggests the property market will decline by 38 per cent in 2020 because of the measures imposed to prevent the spread of Covid-19.
According to research by Knight Frank, transactions across the UK are likely to hit a maximum of 734,000 home sales which is thankfully less severe than the 45 per cent drop seen in the year following the financial crisis.
The speculative research suggested that the coronavirus induced housing sector decline will not reach the depths of 2008/09, mainly because the housing market was in a healthy upward trajectory prior to the virus entering the UK.
Because there is still a desire to move and clear pipeline of activity currently blocked by governmental advised suspension, the market is likely to explode into life once restrictions are lifted.
Furthermore, the third of the UK population planning to move in 2020 will re-enter the market with the data suggesting that volume levels will surpass 2019 by around 18 per cent in 2021 and further growth expected over the next five years.
Knight Frank are confident in property market resilience because of government intervention and significantly lower unemployment projections when compared with 2009.
Oxford Economics predicts that unemployment could reach 5.5 per cent by the end of April and reaching maximum levels in 2020 of 4.17 per cent. Prior to the financial crash, employment levels were stable at 5.2 per cent with this figure rising to 8.5 per cent at the crash’s peak.
Similarly, the government’s decision to introduce the Employment Retention furlough scheme, £350 billion package of measures to help the UK economy and reducing interest rates to 0.1 per cent, could ensure the property market and UK economy can bounce back quickly.
In order to keep borrowing low, interest rates are also expected to remain below 1 per cent until the opening quarter of 2023 and will not exceed 1.5 per cent until the end of 2024. Hopefully, this will mean cheaper mortgage options once lenders feel they are able to open up a larger range of products once social distancing measures are lifted.
Overall, these projections are based on the government’s coronavirus exit strategy and lockdown restrictions being lifted by the end of May. If the UK public remains in lockdown until the autumn, any resurgence will be delayed further.
Oliver Knight, associate at Knight Frank and research author, commented:
“For the government to see a full recovery of the market, with all of these “lost” sales carried forward, there will be a need for substantial incentives to ease market liquidity – including a reduction in stamp duty.
“There is in reality only one issue which will determine the performance of the UK economy, however – and that is the route the government takes out of the current lockdown.
“Our outlook is based on the assumption that the current very restrictive lockdown will remain in place through April and May with a gradual lifting through June. Any loosening of movement restrictions before this time will imply an improvement in the activity levels and price movements we are forecasting.”
