Transactions Set For 60% Decline By Quarter 2
By the time the coronavirus is under control and social distancing restrictions are lifted, UK property transactions would have fallen by 60 per cent.
According to the latest ‘UK Cities House Price Index’ by Zoopla, current restrictions will mean that reduced activity will cause transactions in the second quarter of the year to be down 60 per cent on the same time in 2019. A time when the UK was already feeling the strain caused by Brexit uncertainty.
The index also predicts that the third quarter of 2020 will suffer from a further fall in sales volumes until estate agents and key stakeholders in the property market are able to rebuild their sales pipelines and buyers decide to re-enter the market. Sales agreed in individual spring months could fall by 80 per cent on 2019 levels.
The index has reported a considerable drop off in buyer enquiries with demand falling by 40 per cent in the 7 days to March 22 compared with the seven days to March 15.
For the short term market, buyers are continuing to agree to new purchases that are sold subject to contract and are around 2 or 3 months away from completion. However, sales agreed in the past week had reduced by 15 per cent when compared with the week earlier and 4 per cent lower than the same time in 2019.
This is the picture being presented to us as we enter a lockdown situation. With estate agents now considered non-essential workers and house moves encouraged to postpone as soon as the imminent exchanges have taken place, it seems inevitable that, at least temporarily, transactions in the UK residential and non-residential markets will decline significantly.
Twenty7Tec’s daily market survey into search and value of mortgage loan volumes is highlighting clear declines on a day by day basis.
Data for Tuesday March 24 suggested that the volume of searches completed had fallen by over a quarter (25.44 per cent) on the same day last week and down by a third (31.8 per cent) on the same day two weeks ago.
Documents prepared had reduced by 20.38 per cent on a weekly basis and 29.2 per cent over the fortnight whilst the value of loans documented was down 18.1 per cent and 26.7 per cent respectively on a weekly and fortnightly comparison.
These statistics were up to 10 per cent higher than the declines published in Monday’s report and around 11 per cent down on any activity over the past month.
James Tucker, CEO of mortgage technology provider Twenty7Tec, commented:
“These are stark figures and show a market trying to cope with a rapidly changing context. The economic announcements from Government have slowed down over the past few days, but the ramifications of their decisions are being played out in the mortgage market.
“One thing to note is that these figures include some of the days prior to the announcement of the three-moth mortgage holiday. From tomorrow, our rolling seven-day figures will all be post mortgage holiday announcement figures, so we’ll begin to be able to see how well that announcement has shored up confidence.
“On the evidence of the daily performance, however, searches volumes are significantly down. Monday’s (24/3) activity was akin to a normal Friday. Tuesday’s (25/3) activity was at least 11% lower than any weekday activity we have seen over the past four weeks. Yesterday’s daily searches figures are down almost one-third on the same day two weeks prior and down one-quarter on the same day last week.
“Of course, there are periods in the year when the market expands or contracts by as much as 25%, but only when there are major external forces does this happen over the course of just two weeks.
“There’s also been a huge shift in the balance of purchase and remortgage volumes from parity last Wednesday to yesterday’s split of 42:58 purchase/remortgage. Remortgage search volumes had also held up well over the past few days until yesterday when we saw an 8.1% drop.
“The drops in mortgage searches over the past 24 hours have been particularly marked in first time buyers, down 24.1%. The least affected group are joint mortgages where searches are down a comparatively small 3.4%.
“We saw both Together and Keystone put a pause on their activity in the market yesterday, potentially a sign of the rising costs for some lenders. We also saw the major players removing some tracker products and also slim down their range of BTL products available.
“The financial markets rebounded yesterday, including, in some cases, the largest single day rises in the past century. The mortgage industry has quickly and adeptly adapted to the new economic realities. As a direct result of our industry’s efforts and collaborative work with the Government, we are well placed to service the new economy over the days, weeks and months ahead.”
Richard Donnell, Director of Research and Insight at Zoopla, said:
“Covid-19 presents a major new challenge – not just for the housing market but for the UK and global economies. Fifty years of history shows that external shocks have impacted the housing market to differing degrees, largely down to the scale of direct impact on the UK economy.
“The initial impact of external shocks is to reduce consumer confidence and put a brake on housing demand and the number of people moving home, which we can see in our latest figures. Levels of property transactions are typically more volatile than changes in house prices.
“We do not expect any immediate impact on prices. Beyond this, the outlook for house prices largely depends upon how the Government’s major package of support for business and households reduces the scale of the economic impact. Low mortgage rates mean forbearance will remain the preferred choice for lenders, but further Government support in these unique times cannot be ruled out.
“The timing of any rebound in housing market activity depends upon when new restrictions are lifted, and the extent to which households and businesses are able to return to a normal way of life. Browsing for homes online is set to continue and, while demand for property may rebound quickly, it will take several months for agents to rebuild new business pipelines.”