“Sold prices show a market waiting to bounce back.”
You can always rely on an estate agent to point to a patch of blue sky even as the rain clouds roll in. They may be about to get drenched.
According to the Nationwide, house prices in the UK fell by 1.7% in May - the biggest monthly fall since the last recession.
Estate agents were allowed to reopen three weeks ago. They speak of “pent-up demand” for property, which may be true of course, but prices headed South.
In the last downturn the housing market ended up in the doldrums for 17 months. Between October 2007 and February 2009 the price the average home fell by 19%, according to the same Nationwide data series. Is history about to repeat itself?
A crash is certainly plausible. This recession looks severe. In March economic activity fell by as much in a single month (as a proportion of GDP) as it did during the whole of the financial crisis.
Before the outbreak of Covid-19 the housing market was picking up, helped by record levels of employment, low borrowing costs and the Conservative’s landslide election victory, which delivered something akin to political stability.The Bank of England continues to pull every lever it can make money cheap and easy to borrow but unemployment is rising despite extraordinary and unprecedented efforts by the government to keep households and businesses afloat.
Zoopla, the online estate agent, says searches for property surged 88% as the lockdown restrictions lifted but an astonishing 1.86 million homeowners have applied for a mortgage holiday - just over one in six of the outstanding stock of residential and buy-to-let loans.
Banks will tell you the vast majority of those who have deferred could afford to restart their monthly payments but it’s worth remembering that 11.2 million jobs in the UK - that’s around a third of everyone in employment - are currently being subsidised by the taxpayer.
In theory, there’s nothing to stop those who are either furloughed or receiving payments from the Self Employed Income Support Scheme from applying for a mortgage, although moving house is unlikely to be high on their list of priorities.
The Bank of England tells us that, during April, mortgage approvals fell to 15,848 - the lowest level since 1993. In the same month, net levels of consumer credit fell by £7.4 billion. Another record. Faced with lockdown, the instinct of many households was to repay debt not to borrow.
The experience of confinement may well have caused us to rethink what we want from home. Nationwide says survey data suggests gardens are now in high demand and that 15% of people say they have decided to move “as a result of life In lockdown”.
Fair enough but their ability to do so will depend on what happens next to house prices, which in turn will depend of whether homeowners hold onto their jobs.
Nationwide says the outlook for the market is “highly uncertain”. This feels like a considerable understatement.