April 27th, 2020
The rapid and complete shutdown of the property market resulting from coronavirus lockdown could cause UK house prices to fall by as much as 10% this year.
However, according to the research from Savills, while we can expect a severe economic shock in the immediate term, a robust recovery is expected by 2022 and a cumulative rise of around 15% in five years, in line with Savills’ previous forecast of November 2019.
In a mark of the uncertainty of the current climate, Savills head of research Lucian Cook offered two possible scenarios, depending on how quickly the UK contains the spread of the disease and how long restrictions remain in place.
In the event of a longer downturn, Lucian Cook says a an average house price will fall by 10%, while if the economy experiences more of a short, sharp shock, he expects price falls of 5% this year.
Savills expects the number of home sales to drop drastically to between 566,000 and 745,000 this year, from just under 1.2 million last year.
The Government’s swift action to support jobs and earnings, more than a decade of strict affordability checks from mortgage lenders, plus historically low interest rates will all underpin consumer confidence and buyer demand.
And, although Cook predicts it will likely take until 2022 for buyer confidence to return in earnest, Savills is already seeing tentative green shoots of interest with its web traffic back at pre-coronavirus levels last week following a dip during the fortnight after lockdown was imposed. After a number of weeks working from home, people are in the early stages of thinking what to do next.
Country homes are proving very popular, which is understandable given the practical implications of a lockdown and people’s desire for more space.
Five-year house price growth forecast
2020 2021 2022 2023 2024 Cumulative
2019 forecast 1% 4.5% 3% 3% 3% +15.3%
Scenario one -5% 5% 8% 4% 4% +15.4%
Scenario two -10% 4% 12% 6.5% 3% +15.0%
