Demand for housing is lower by 40% last month with the impact of the Coronavirus pandemic changing the market.
The year started with a recovery in confidence from first time buyers and home movers as the housing market recorded the strongest growth in five years, according to the Zoopla Cities House Price Index.
This has been turned on its head with the arrival of the Coronavirus (Covid-19) as new buyer demand reduces by 40% due to households self-isolating and unable to progress their house purchase.
Sales are still being agreed ‘subject to contract’ where mortgages applications have already been accepted but these are 15% lower in the last week and at similar levels to last year.
Suspended valuations stop mortgages
The suspension of physical valuations has forced mortgage lenders to start withdrawing products with high loan to value and limiting borrowing to 75% as well as lower maximum loans.
This will stall the market for first time buyers with smaller deposits of less than 25% of the property value as there will be very few products available.
Historical records show external events like Covid-19 shock housing activity rather than prices initially and sales prices are linked to the UK economy.
This table from Zoopla shows the leading ten city house prices and annual growth to February 2020.
| City | Current price | Annual growth |
|---|---|---|
| Nottingham | £156,700 | 3.8% |
| Leicester | £180,000 | 3.6% |
| Edinburgh | £236,700 | 3.4% |
| Manchester | £172,500 | 3.3% |
| Liverpool | £122,300 | 3.0% |
| Leeds | £167,800 | 2.8% |
| Birmingham | £167,000 | 2.6% |
| Cardiff | £210,100 | 2.4% |
| Sheffield | £138,400 | 2.4% |
| Glasgow | £123,200 | 2.1% |
Over the last year house price growth was highest in Nottingham rising 3.8% and lowest in Aberdeen down -2.2% with London improving by 0.6%.
In the short term house prices are expected to remain unchanged as homeowners do not need to sell and the government support measures during the Coronavirus outbreak allows people to cover their expenses.
There is no evidence of a mass removal of homes from the market with new properties currently being listed although the ability to sell homes is not possible due to the Coronavirus lock-down.
With the difficulty of downsizing due to the lock-down, the equity release buyer can access money with a lifetime mortgage using this to maintain your lifestyle, gift to child or grandchild.
House prices depend on economic impact
The action taken by the government to support homeowners such as the three-month mortgage payments holiday is going to reduce the number of forced sellers on the market in the months to come.
Support is available to tenants that cannot afford the rent and buy-to-let landlords are offered the same mortgage holiday on the interest they pay to the lender to help with debts.
Once this period is over houses prices depend on unemployment and the measures the government takes to limit this with further forbearance between the lender and borrowers.
Rising unemployment is likely to impact on house prices and Zoopla predicts sales volumes will reduce by 60% in the second quarter and by up to 80% in the third quarter 2020 compared to last year.
For remortgage buyers at the end of your mortgage deal, you can reduce your monthly repayment costs by avoiding the lender’s expensive variable rate and switch to a preferential rate.
What are your next steps?
Call our LCM mortgage brokers for advice if you are a first time buyer, want to remortgage your existing home for the best mortgage deal, moving home or a buy-to-let investor.
Learn more by using the property value tracker chart, mortgage monthly costs calculator and equity release calculator. Start with a free mortgage quote or call us and we can take your details.
For equity release buyers our London City Mortgage advisers can recommend lifetime mortgages allowing you to receive cash from your property to purchase a new car or help your children start or expand a business.
