UK house prices will continue to fall and won’t recover those losses until the end of 2022, analysts have forecast.
Buyers are likely to be nervous about big purchases and house prices as personal finances come under scrutiny amid the coronavirus pandemic, forcing house prices to drop five per cent this year, the 9–22 June poll of strategists by Reuters found.
In a worst-case scenario values will fall 11 per cent this year, the poll found.
However prices are forecast to rise 1.5 per cent next year and 3.5 per cent in 2022.
In London, prices will also fall five per cent this year but recovery in the capital is expected to be stronger. Prices there will rise two per cent next year and 4.3 per cent in 2022.
Britain’s economy shrank by a quarter in March and April as sectors of industry were shut down, leading businesses to shed jobs and vacancies to plunge by a record amount.
In a poll taken in February, before the worst impact of the pandemic was known, UK house prices were forecast to rise two per cent this year and 2.8 per cent in 2021.
“Housing market activity is unlikely to return to normal levels until it is clear that the worst of the Covid-19 crisis is behind us,” said Andrew Brigden at Fathom Consulting.
Further clouding the outlook, Britain’s transition period after leaving the EU is due to expire at the end of December and so far there has been little signs as to the future relationship the two sides will have.
“While Covid-19 has caused a wave of uncertainty, Brexit is still on the horizon and a no deal may put further downward pressure on house prices, both before and after the transition period ends,” PwC’s Jamie Durham said.
However the forecast was not universally agreed upon, with some analysts arguing the predictions did not reflect what property agencies are seeing on the ground.
“A five percent fall in house prices over the next six months is highly unlikely given the sharp return in market activity seen over the last few months,” Marc von Grundherr, director of Benham and Reeves, told City A.M.
“Even in the face of a market lockdown and pandemic uncertainty, UK house prices have edged up on an annual basis and while month-to-month movement has shown large declines in places, such a short-term measure is far too erratic to base any long-term health predictions on.”
Von Grundherr added that in London agencies had seen the level of asking price remain “very robust”, with significant increases in buyer enquiries.
Anna Clare Harper, co-founder of property fund Anglo Residential, said: “Perhaps the only thing more vulnerable to manipulation than statistics is forecasts, and the assumptions they are based on. It is hard for any of us with knowledge of the market to make totally unbiased forecasts.”
“There will be winners and losers, and yet clearly the need for quality, affordable housing is not going anywhere. Ultimately, we all still need a roof over our heads,” she added.