- The Halifax reported prices dipped 0.6% month-on-month in April after a revised fall of 0.3% in March. The annual rate of increase moderated to 2.7% in April from 3.0% in March and a peak of 4.1% in January, which had been the highest level since February 2018.
- The three-month/three-month gain in house prices slowed substantially to 0.7% in the three months to April from 2.0% in the three months to March and 2.8% in the three months to February.
- The early-2020 upturn in the housing market has been brought to a halt by the impact of coronavirus on the economy, households and people’s movements.
- Indeed, the housing market looks set to be at a standstill for the next few weeks at least.
- Both the Halifax and the Nationwide have observed that the shortage of transactions over the coming months will make gauging house price trends difficult.
- The EY ITEM Club believes house prices could fall back 5% over the next few months. The expectation is that house prices will come under downward pressure from a sharp rise in unemployment and people’s incomes being hit, as well as lower consumer confidence and increased caution.
- Once restrictions start to be lifted on people’s movements, housing market activity should progressively pick up. Even so, the housing market looks unlikely to return to the levels seen at the start of 2020 for some time. Very low borrowing costs with the Bank of England taking interest rates down to 0.1% should provide some support.
Howard Archer, chief economic advisor to the EY ITEM Club, comments:
The Halifax reported house prices dipped 0.6% month-on-month in April. House prices had previously fallen 0.3% month-on-month in March (revised down from a flat performance) following four months of increases, including 0.2% month-on-month in February and 0.4% month-on-month in January.
The annual rise in house prices moderated to 2.7% in April from 3.0% in March. It had earlier fallen back to 2.8% in February from 4.1% in January, the highest level since February 2018. It had previously risen to January’s peak from 4.0% in December, 2.1% in November and just 0.9% in October (the lowest since April 2013).
The three-month/three-month gain in house prices slowed substantially to 0.7% in the three months to April from 2.0% in the three months to March and 2.8% in the three months to February.
The Halifax said “with market activity currently almost at a complete standstill, the limited number of transactions available means that calculating average house prices has inevitably become more challenging. This will lead to a great deal of volatility until more data becomes available.
Housing market stalls amid coronavirus restrictions after early-2020 improvement
Latest data from the Bank of England show mortgage approvals for house purchases fell back sharply to 56,161 in March (the lowest since March 2013) from a more than six-year high of 73,674 in February. Mortgage approvals for house purchases had previously risen to 73,674 in February (the most since January 2014) from 71,430 in January, 68,143 in December and a 5-month low of 65,344 in October.
March’s marked drop in mortgage approvals occurred as the early-2020 upturn in the housing market was brought to a halt during the months by the impact of coronavirus on the economy, households and people’s movements. This culminated in the lockdown imposed on 23 March. Prior to the coronavirus impact, the housing market was benefiting markedly early on in 2020 from increased confidence and reduced uncertainties following December's election.
The Government has advised homebuyers and renters to delay moving as much as they can while the emergency measures are in place. The government has further stated that no visitors are allowed to visit properties while “stay-at-home” measures are in force, including estate agents and surveys as well as potential buyers. Meanwhile, some mortgage lenders have started to temporarily restrict or even decline new mortgages - although some of the larger ones have now started restoring them.
Zoopla reported that demand for houses fell by 70% over March, with the decline bottoming out in early April and since edging back up, with the result that in latish-April, demand was about 60% lower than at the start of March. Meanwhile, agreed sales were reported to be running at about one-tenth of their normal level for the time of year. The number of houses for sale is only about 4% lower than at the start of March. Zoopla also reported some 373,000 property transactions worth a combined value of £82 billion are on hold due to coronavirus.
The March RICS survey observed that “having started the year showing a marked pick-up in momentum, sentiment across the UK housing market predictably deteriorated sharply in March as highlighted by the latest RICS UK Residential Survey results. Government measures introduced to combat the spread of the coronavirus have required estate agents to close their offices, meaning much activity has effectively been frozen over the coming months. The situation is evolving rapidly, and it remains unclear how long such restrictions will remain in place. However, as is the case across many sectors of the UK economy, these closures are going to take a significant toll on the outlook for the market this year.