UK house prices are set to fall three per cent this year as market activity grinds to a halt during the coronavirus crisis, forecasts published today revealed.
House sales are expected to plunge 38 per cent year on year to 734,000 transactions assuming the current lockdown remains in place until the end of May, according to real estate giant Knight Frank.
Mainstream UK house prices will slip three per cent in 2020, while prices in prime central London will remain unchanged.
However, the report predicted a sharp recovery in 2021, with prime central London set for growth of eight per cent next year.
It follows a strong start to the year for the UK’s housing market, with prices rising three per cent in March just before the pandemic hit, according to Nationwide figures published last week.
“While we expect a revival in activity to continue, with volumes next year expected to be 18 per cent above the level seen in 2019, this expansion in sales in 2021 will not fully offset the losses seen this year,” said Liam Bailey, global head of research at Knight Frank.
“Meaning that of the nearly 526,000 sales we expect to be ‘lost’ due to lockdown this year, less than half will be carried into 2021.”
Bailey called for “substantial incentives” to ease market liquidity and prompt a full recovery of the market, including a reduction in stamp duty.
Knight Frank forecast that tenancies agreed in prime markets across London and the home counties this year will be roughly 25 per cent below the five-year average.
But following rental value growth of 1.2 per cent and 1.1 per cent in the year to March in prime central London and prime outer London respectively, the estate agency said it expected rental values to remain flat in 2020.
“Once the current crisis passes and activity begins to resume, we have to expect weaker economic activity in the first half of 2020, the dislocation in the jobs market and weakened consumer sentiment will impact on prices, however the relatively finite timespan of the crisis means declines will be limited,” Bailey said.