Savills Forecast Has Gloomy Outlook
Savills have released their latest forecast, and it can make for some glum reading.
Whereas most of the news is now populated with positive stories of the ‘bounce back’ of the property market, Savills is shedding a new light on the situation, with their five year forecast.
“We published our first note on coronavirus and the housing market in March assuming a short-lived but significant economic downturn, where employment spiked but fell back relatively rapidly with a limited long term impact on the economy.”
“Given low levels of price growth in the run-up to the crisis, very low costs of debt, significant short-term government support for jobs and lender forbearance we expected that falls in the average value of the UK home to be contained to 5-10%. However, we did not have enough information to be confident in being more specific than that. At the time it was unclear how long and to what extent social distancing would restrict activity in the housing market. But it was clear that were would be a significant impact on transaction levels in the short term.”
As a result of two months of lockdown the UK economy contracted by 5.8% in March, resulting in forecasters altering their five year forecasts. People are now expecting a more gradual recovery over a longer period of time.
“We are currently seeing a release of pent-up demand, which may trigger a brief spike in transactions in England over the summer. But uncertainty around values and rising unemployment will add to lender caution, particularly when lending at higher loan to value and loan to income ratios. The risk of a ‘hard Brexit’ at the end of the year may weaken business appetite to recruit more staff, slowing any rebound in employment.
“We predict completed transactions will remain low at 25% of the five-year average over the second quarter of 2020. However, the reopening of the housing market in England for viewings and transactions on 13th May, together with a pick up in sales agreed since then, gives us confidence that activity should be able to recover gradually over the second half of the year.
“We expect transactions to return to normal levels by 2021 Q3, followed by a year with more transactions than normal as we work through the pent up demand that accumulated during 2020.”