Press release

25 Mar 2020 London, GB

Largely decent housing market at start of 2020 set to be ended by coronavirus

Most data and surveys show that the housing market ended 2019 and started 2020 on the front foot as it benefitted from reduced uncertainties following December’s election.

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  • Most data and surveys show that the housing market ended 2019 and started 2020 on the front foot as it benefitted from reduced uncertainties following December’s election. This was evident in mortgage approvals for house purchases rising to a near four-year high in January and prices firming markedly on most measures.
  • However, the Land Registry/ONS reported annual house price inflation fell back to 1.3% in January after climbing to a 12-month high of 1.7% in December from 1.1% in November and 1.0% in October. The 2019 low had been 0.6% in July. Prices fell an unadjusted 1.1% month-on-month in January.
  • Despite the weaker Land Registry/ONS figures for January, data from the Halifax and the Nationwide point to firm house prices in February.
  • The late-2019/early-2020 upturn in the housing market looks certain to be brought to a halt by the impact of coronavirus on the economy, households and people’s movements (which will restrict viewings of properties). This is expected to outweigh the modest support to housing market activity that may come from the Bank of England slashing interest rates to 0.1%.
  • Not surprisingly, Rightmove has in the last week reported a “significant” slowing in property sales.
  • Lower housing market activity over the coming months will likely weigh down on prices – and a falling back from early-2020 highs seems highly probable.                                        

Howard Archer, chief economic advisor to the EY ITEM Club, comments:

“The Land Registry/ONS reported the year-on-year increase in house prices fell back to 1.3% in January, after climbing to a 12-month high of 1.7% in December from 1.1% in November and 1.0% in October. Annual house price inflation had been as low as 0.6% in July 2019, which had been the lowest rate since October 2012. Annual house price inflation stood at 2.0% at end-2018, 4.5% at end-2017 and a peak of 5.1% in October 2017.

“House prices fell an unadjusted 1.1% month-on-month in January. This followed an increase of 0.5% in December. Prices had dipped 0.6% month-on-month in January 2018.

“London prices rose 1.4% year-on-year in January, which was down from 1.8% year-on-year in December, which had been the strongest rise since October 2017 and followed a drop of 1.0% in November. The annual increase in UK house prices was limited in much of 2019 and 2018 by falling year-on-year prices in London. Indeed, London house prices fell continuously year-on-year between February 2018 and August 2019, with a peak annual decline of 3.0% in May. London house prices fell 1.1% month-on-month in January.

“It needs to be noted that the ONS’ measure of house price inflation lags many of the other measures as it is based on mortgage completions.

“Data are also out for house prices in February, which were firm. The Halifax house prices rose 0.3% month-on-month in February, following an increase of 0.4% month-on-month in January. The annual rise in house prices fell back to 2.8% in February after rising to 4.1% in January (the highest level since February 2018) from just 0.9% in October (the lowest since April 2013). This reflected the fact that house prices had spiked 1.5% month-on-month in February 2019. The underlying recent strength in house prices on the Halifax measure was highlighted by the three-month/three-month gain in prices increasing to 2.9% in the three months to February. Meanwhile, the Nationwide reported annual house price inflation was at a 19-month high of 2.3% in February (after a rise of 0.3% month-on-month).

Housing market had picked up markedly but now there is evidence that coronavirus is affecting activity

“Latest data from the Bank of England show mortgage approvals for house purchases rose markedly to 70,888 in January, taking them to the highest level since February 2016. This was up from 67,930 in December, 65,954 in November and a 7-month low of 65,285 in October.

“The data very much fuelled the view that the housing market was benefitting markedly early on in 2020 from increased confidence and reduced uncertainties following December's election. In contrast, housing market activity had been particularly sluggish in the latter months of 2019, falling to a seven-month low in October, indicating that activity was being pressurised by heightened uncertainties over the domestic political situation and Brexit.

“Latest surveys added to the evidence that the housing market benefitted from reduced uncertainties following the decisive December Election result. The February RICS survey reported that “New buyer enquiries, agreed sales and fresh listings all reportedly increased over the survey period, extending a run of positive readings going back to December.”

“However, there were signs of coronavirus starting to have some impact. The February RICS survey also observed that “although near term sales expectations remain positive, optimism has moderated somewhat, with anecdotal evidence suggesting concerns over the economic impact of the coronavirus are weighing on the outlook to some extent.”

“Additionally, Rightmove reported on 20 March that there was a “significant” slowdown in property sales.”