Everybody's wondering how Covid-19 could affect house prices around the UK.
In the months leading to the coronavirus pandemic, the economy was soaring and seemed to show no indication of slowing.
Elavace property investors stood at the summit of the most lucrative capital gains from their property investment with house prices growing at a staggering 0.7% rate consecutively each month.
Since then, the property market has inevitably become stagnant with fewer transactions taking place between March and April by around 70%, according to Zoopla.
How has the property market changed since May?
As many will already know, on 14th May, the government announced they would begin easing some of the lockdown measures in England, which in turn, meant the property market could reopen.
This will be good news to estate agents and property buyers alike who can now conduct house viewings in person once again.
Seemingly, the news shone so well amongst the UK property market that according to Rightmove, their websites traffic returned to pre-lockdown levels of up to 5.2 million visitors within the very same day.
Of-course, further time will be needed for property sales figures to regain to the booming levels they once were. In the first week of the market reopening, just 11,000 properties were listed for sale on Rightmove, 65% less than the same week last year.
This is to be expected with all the uncertainty circulating the country at this time. A new survey by Zoopla, found that 41% of homeowners are now placing their plans on hold while the economy stabilises.
The agency Knight Frank predicts 734,000 moves this year, along with Savills who place their estimate in the range of 566,000 and 745,000. To put this drop into perspective, there were a total of 1.175m house moves recorded in the UK last year.
So what does this mean for property prices?
It is still far too early to be able to predict how much of an impact the coronavirus will have on property prices.
The figures we have now and the figures we will have in the upcoming weeks are likely to fluctuate so it’s difficult to gauge where the market stands.
In normal circumstances, the most reliable barometer of house prices is the Land Registry’s UK House PriceIndex.
However, the most recent data is up to March, showing that overall house prices fell by 0.2% month-on-month but grew by 2.1% year-on-year to reach£231,855.
The usefulness of this data in understanding the impact of coronavirus is somewhat limited due to many of the transactions likely to have been agreed prior to lockdown telling us only a small portion of the story.
Therefore while we await more up-to-date information, the impact remains unknown.
The market giants can only speculate with the minimal data and experience from previous recessions.
Knight Frank forecasts that UK prices will fall by 3% this year, but then bounce back by 5% in 2021.
Interestingly, Savills has offered two different predictions depending on the coronavirus outcome.
The first of these forecasts a 5% drop in prices this year and a 5%rise in 2021, similarly to Knight Frank. While the slightly more drastic second prediction forecasts a 10% fall this year and a 4% rise in 2021.
Lloyds BankingGroup (which includes Bank of Scotland and Halifax) have been working on the assumption that prices will fall by up to 5% this year, before rising by 2% in2021.
The common consensus amongst all of these property experts is that there'll be an inevitable fall in prices this year leading to a rebound in prices in early 2021.
A driving factor to the fall in property prices is due to the shift in demand for rental properties as a result of the economic impact of coronavirus.
Elavace have published numerous articles about the toll this has taken and will take on employment, especially since the news of Chancellor Rishi Sunak to begin tapering the furlough scheme broke out earlier this week.
While employment is in the driving seat for the drop in prices, another instrumental factor is the lack of mortgage options available right now.
This is set to influence the level of first-time buyers due to many needing to acquire more equity to put into purchases and as a result, many more choosing to step back from the market and choosing renting as a more realistic alternative.
From the beginning of the lockdown, the number of mortgage deals on the market has halved!
Needless to say, there are plenty of good rates still available out there particularly for investors with a bigger deposit.
According to Moneyfacts, data released earlier this month displayed a huge downturn in mortgage rates with them now falling to the lowest levels since it began keeping electronic records in 2007.
As previously mentioned, the buyers with deposits of 5% and 10% are to be most impacted by this, with a large number of these to be first-time buyers.
The good news is that now the market has reopened, we may see some exciting deals circulate the market in the coming weeks and months.
For now, let’s consider the short term...
Despite an initial boost, Zoopla expects for buyers and sellers to start to exert greater caution once the dust settles in the coming weeks.
This article might seem like Elavace have become the bearer of bad news, on the contrary, our Elavace property experts believe this is the perfect position for any budding investors to truly capitalise on a weakened market.
As famous investor, Warren Buffett says, “A good investor is cautious when everyone is greedy, and greedy when everyone is cautious.”
Before the lockdown brought the country to a crashing halt, we can confirm that there were many investors who were set to either begin or expand their lucrative property venture with Elavace.
However, the investors who have had to face this temporary delay have the very real opportunity to receive promising compensation for their wait.
Resuming your investment now may put you in a strong position to test the waters and grab a real bargain from both sellers and developers.
Get in touch with our own developer, Mitchell Walsh, who will attest to this!