Although Hometrack's monthly report covers February property prices, it offers an excellent summary of the market's initial response to the Covid pandemic.
UK city house price growth is +1.6%, higher than the +1.2% a year ago.
The COVID-19 virus has had a rapid impact on housing demand which is 40% lower in the last week of March
Transaction volumes are set to decline swiftly in the coming months by an estimated 60% in the next quarter with a further fall in sales volumes over Q3 2020. The impact on pricing levels will be slower to feed through and depend upon the scale of the direct economic impact.
UK city house price inflation +1.6% yoy
A rebound in consumer confidence saw the housing market register the strongest start for 5 years in early 2020, after a weaker period of growth over 2019. A rebound in consumer confidence resulted in the headline rate increase to +1.6%, compared to +1.2% a year ago.
At a city level, annual growth ranges from +3.8% in Nottingham to -2.2% in Aberdeen (Table 2). In London, the annual growth rate is +0.5%, up from -1.1% a year ago.
COVID-19 has immediate impact on demand
Despite the strong start to the year, the arrival of COVID-19 has totally changed the dynamics of the market and the outlook for 2020. Over the last week we have seen new buyer demand fall 40% as households self-isolate and put major decisions on hold (Fig. 3). Demand is set to fall further now the UK is moving into a 3+ week period of partial lockdown.
External shocks hit sales more than prices initially
Fifty years of history shows that external shocks and global events tend to impact levels of housing market activity more than prices in the short term. The impact on agreed sales prices tends to be more closely linked to direct shocks to the UK economy. It is too early to tell the scale of the direct economic impact of COVID-19, especially considering the unprecedented Government response to support the economy. What is clear is that housing transactions will decline very rapidly over the second quarter of 2020 and, given the time lag from a property being first marketed to becoming a transacted sale sold this will further reduce housing sales into 2020 Q3.
Sales volumes to fall by 60% in Q2 and into Q3 2020
Our modelling points to completed housing transaction volumes in 2020 Q2 being 60% lower than the same period last year. We expect low transaction volumes to continue into the third quarter. Individual months over the spring may see newly agreed sales down by as much as 80% on last year.