Signs of recovery in UK house prices at the start of the year have been brought to an abrupt halt by the coronavirus crisis.
Figures from the Land Registry and the ONS show inflation fell back to 1.1 per cent in February after climbing to an eight-month high of 1.5 per cent in January.
The UK housing market started 2020 on the front foot after the so-called Boris Bounce reduced uncertainty. Bank of England data shows mortgage approvals for house purchases rose to 73,546 in February. It is the highest level since January 2014.
December’s decisive general election result increased confidence and reduced uncertainties. February’s Rics survey said new buyer enquiries, agreed sales and fresh listings all increased.
However, Howard Archer, chief economic adviser to the EY Item Club, said activity and house prices have taken a huge hit from the coronavirus crisis during March. It reflects ” the increasing restrictions on people’s movements as well as the impact on confidence and economic activity.”
Social distancing measures mean estate agents and potential buyers are unable to visit properties. Meanwhile, some mortgage lenders have started to temporarily restrict new mortgages.
UK house prices come under downward pressure
UK house prices have dipped during the nationwide lockdown as the housing market struggles with the restrictions. Rightmove data released this week showed that the average price of property coming to market dipped 0.2 per cent to £311,950. In April last year UK house prices increased 2.1 per cent.
The firm said the statistics were not “meaningful” as there is no “functioning market” due to the lockdown.
Archer said house prices will come under downward pressure from a sharp rise in unemployment and a hit to incomes.
Activity will pick up once lockdown is lifted. However, Archer warns that the anticipated rise in unemployment means the market won’t return to the levels seen at the start of 2020 for some time.
Gareth Lewis, commercial director of MT Finance, said March and April figures are likely “to show a distinct change as the volume of purchases dries up”.