House prices could take a year to recover from coronavirus
14 May 2020, 06:20
House prices could take nearly a year to recover from the fallout of the coronavirus pandemic, the UK's leading property professionals have warned.
A survey by the Royal Institution of Charted Surveyors (Rics) said feedback suggests a recovery in prices after the coronavirus crisis could take longer than a bounce-back in sales levels.
Some property professionals have suggested prices would take 11 months to recover, compared with nine months for sales.
In the lettings market, rents are expected to fall across the UK in the coming three months but stabilise in 12 months' time.
Eighty per cent of Britain's property surveyors said they had seen buyers and sellers pull out of transactions in April as the coronavirus lockdown effectively closed the housing market.
"Not surprisingly, the latest survey shows that housing activity indicators collapsed in April reflecting the impact of the lockdown," Simon Rubinsohn, RICS' chief economist, said.
"Looking further out, there is a little more optimism but the numbers still suggest that it will be a struggle to get confidence back to where it was as recently as February."
Last month, the Rics called for a stamp duty holiday to be introduced for buyers to get the property market moving again and it reiterated that with a call for stamp duty to be permanently reduced or scrapped stamp duty for downsizers in a bid to 'kickstart market fluidity.'
Rics has welcomed the re-opening of agents’, conveyancers, surveyors and removal company offices but it warned that the Government must do more to bolster demand and house building.
The findings were contained in Rics's UK-wide April survey, which said 35 per cent of property professionals believed prices could be left up to 4 per cent lower on the re-opening of the housing market, while more than 40 per cent thought prices could fall by more than 4 per cent.
Four-fifths of surveyors said they have seen buyers and sellers pulling out of transactions due to the coronavirus pandemic.
An overall net balance of 92 per cent of surveyors saw the number of sales being agreed decrease rather than increase in April.
A net balance of 96 per cent reported a fall rather than an increase in new properties coming on the market - the weakest reading since this question started being asked in April 1999.
In April, the survey sought views on the potential support measure of a stamp duty holiday from Government as sales restart. Just over six in 10 believed that a stamp duty holiday would help the market recover post-pandemic, by lifting sales and leaving prices relatively unchanged.
In five years' time, rents are predicted to be increasing by around 2.5 per cent annually, while house prices are expected be increasing by around 2 per cent yearly.
On Wednesday, the Government paved the way for property professionals in England to get back to work, with estate agents now able to reopen their doors and show people around properties, subject to social distancing guidelines.
As we reported yesterday, despite the easing of restrictions in England, the way people are able to transact has changed.
"Virtual" property viewings are still being encouraged, along with the use of hand sanitiser and regular handwashing for those house hunters who are so interested in a property that they want to physically see it. Some estate agents have said they are allowing visits to branches by appointment only.
Simon Rubinsohn, Rics chief economist, said: "Not surprisingly, the latest survey shows that housing activity indicators collapsed in April reflecting the impact of the lockdown.
"Looking further out, there is a little more optimism but the numbers still suggest that it will be a struggle to get confidence back to where it was as recently as February. Moreover, whether this can be realised will largely depend on how the pandemic pans out and what this means for the macroeconomic environment."
Hew Edgar, head of UK Government relations, said: "Rics last month called on the UK Government to explore confidence-boosting measures for the residential market as it reopens, and the data suggests that our proposal for a stamp duty holiday would be a successful change that would boost transactional activity, helping people move home.
"There are, of course, other options available to Government as they reopen the market, notwithstanding stamp duty options such as reducing or removing stamp duty for downsizers that would kickstart market fluidity, and we look forward to continuing conversations as the market starts to move again."