ResidentialJun 2 2020

House prices drop in wake of lockdown

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House prices drop in wake of lockdown
ByChloe Cheung

UK house prices in May saw the largest monthly fall since February 2009, according to Nationwide’s latest house price index.

Prices fell by 1.7 per cent month-on-month in May after seasonal adjustment, making it the largest monthly fall since February 2009.

The annual rate of house price growth also slowed as a result, to 1.8 per cent from 3.7 per cent in April.

Robert Gardner, chief economist at Nationwide, said housing market activity had “slowed sharply” as a result of measures implemented to control the spread of coronavirus.

He said: “In the opening months of 2020, before the pandemic struck the UK, the housing market had been steadily gathering momentum.

"Activity levels and price growth were edging up thanks to continued robust labour market conditions, low borrowing costs and a more stable political backdrop following the general election.

“But housing market activity has slowed sharply as a result of the measures implemented to control the spread of the virus.

"Indeed, data from HMRC showed that residential property transactions were down 53 per cent in April compared with the same month in 2019."

Monthly change (seasonally adjusted)-1.7%0.9%
Annual change1.8%3.7%
Average price (not seasonally adjusted)£218,902£222,915

The property market was effectively closed for seven weeks as a result of the lockdown until last month the government announced that anyone in England could move home under new coronavirus guidance.

James Forrester, managing director of estate agent Barrows and Forrester, said he believed the figures showed a "lockdown inspired blip" rather than the beginning of a market decline.

He said: “Yes, this is the largest monthly fall in over a decade and many will seize on this opportunity to prophesize the end of the market, however, this simply isn’t what we’re seeing on the ground.

“The market all but stopped dead overnight when the lockdown was imposed and so a [1.7 per cent fall] could arguably be viewed as a positive, all things considered.

"Since it’s reopened, estate agents and portal sites are reporting high levels of traffic, enquiries, viewings and sales. Activity that bodes very well for the future.”

Similarly, Tomer Aboody, director of property lender MT Finance, said he was not surprised by the data, which he called "artificial numbers".

He said: "It’s not a fair reflection of the market and sentiment but purely a result of necessary measures taken by the government to deal with the pandemic.

“Once lockdown is over, would-be buyers should regain their confidence to move."

However, he said a stimulus from the government had to happen to support the market's return. He suggested this could be in the form of a reduction of stamp duty or its removal for some months.