UK house prices rose three per cent last month just before the coronavirus outbreak hit, according to Nationwide figures released today.
But the bank warned housing market activity is “grinding to a halt” as the coronavirus lockdown stops buyers and sellers from viewing properties.
Banks have also withdrawn mortgages or made it tougher to secure mortgages, also dampening UK house prices.
Coronavirus means outlook ‘highly uncertain’
“Housing market activity is now grinding to a halt as a result of the measures implemented to control the spread of the virus,” Nationwide’s chief economist Robert Gardner said.
“Indeed, a lack of transactions will make gauging house price trends difficult in the coming months.
“The medium-term outlook for the housing market is also highly uncertain, where much will depend on the performance of the wider economy.”
The UK is facing a severe economic retraction as a result of the coronavirus crisis. The government has closed all shops save supermarkets, pharmacies and banks.
And people are able to leave the house once per day to exercise, while maintaining two metres distant from others.
“Economic activity is set to contract significantly in the near term as a direct result of the necessary measures adopted to suppress the spread of the virus.,” Gardner added.
The value of British homes rose 0.8 per cent on a monthly basis in March, up from February’s 0.3 per cent change. And its three per cent annual growth rate outpaced February’s 2.3 per cent growth.
That left the average UK house price at £219,583 in March.
UK house prices growth ‘meaningless’
Jeremy Leaf, north London estate agent and a former RICS residential chairman, called today’s UK house prices figures “academic” in light of coronavirus.
“However, they do raise expectations that when restrictions begin to ease, hopefully relatively soon and without too much damage to the economy, there is every chance that activity will pick up nearly where it left off,” he added.
“We are finding that only those industries particularly badly affected by coronavirus are having to pull out of transactions, such as those working in the travel, hospitality or entertainment industries.”
But Lucy Pendleton, founder director of independent estate agents James Pendleton, painted a darker picture. She said UK house prices were now “irrelevant” with the coronavirus outbreak. Pendleton has put more than half its estate agents on furlough, and last week house sale numbers slumped 84 per cent.
“It wasn’t so long ago that commentators talked of Brexit uncertainty putting transactions on ice but that feels like ancient history now,” she said. “Covid-19 has brought brutal new meaning to a frozen market.”
Lenders back away from mortgages
Mark Harris, chief executive of mortgage broker SPF Private Clients, added that “lenders remain keen to lend”.
That is despite some having to pull back from high loan-to-value deals. Nationwide yesterday tightened measures on mortgage applications and no longer takes bonuses and overtime pay into account.
Nationwide also pulled its mortgage offering for low-deposit borrowers earlier this week.
Lloyds Banking Group, which owns includes Halifax and Scottish Widows and is the UK’s largest lender — has capped lending at 60 per cent of loan to value.
And Barclays has put a cap on how many mortgage applications it will accept from brokers. It has also limited high loan to value mortgages.
“In most instances this is a temporary move while they get to grips with the inability to carry out valuations, plus redirect their staff to deal with mortgage payment holiday enquiries,” Harris said.
UK house prices ‘will recover quickly’
“The only silver lining to this situation is that political uncertainty and underlying economic weakness play no part in this chaos,” Pendleton added. “The housing market will come roaring back to life as soon as the lockdown ends, aided by interest rates that are significantly lower than when it began.”
However, it is unclear how long the coronavirus lockdown will weigh on UK house prices.
“This crisis has ripped staff and customers from our hands,” Pendleton added. “Coronavirus has broken the spirits of businesses on a scale not seen since the financial crisis. It is an incredibly testing time but we must come out the other side, and come out fighting.”