The number of house purchases in the UK is set to plunge dramatically as the coronavirus outbreak causes demand to dry up, a report has said, which is likely to send house prices tumbling.
The spread of Covid-19 is already having a big effect on the market, causing a 40 per cent drop in demand for housing in the seven days to 22 March, according to data from property website Zoopla.
Things are set to worsen, however, Zoopla said. It forecasts a fall in transaction volumes of up 60 per cent during the April to June period.
With much of the country on lockdown, high streets empty and offices and factories close, analysts predict a deep recession for the UK.
Such a prospect has made Britons reconsider major purchases like a new home. Meanwhile, social distancing measures have caused property viewings and valuations to all but cease.
A rapidly growing proportion of house sales are starting to fall through, Zoopla said. Cancellations last week were 60 per cent higher than the previous week.
House prices set to take a hit
Richard Donnell, director of research at Zoopla, said he does not expect an immediate fall in house prices.
Yet if unemployment starts to rise and credit starts to dry up, house prices could take a hit, Zoopla said.
The Office for National Statistics yesterday said house prices were up 1.3 per cent year on year in January.
But Howard Archer of the EY Item Club, said house price growth “looks certain to be brought to a juddering halt”.
Chancellor Rishi Sunak and Bank of England governor Andrew Bailey have unveiled a raft of measures to support the economy. They include cheaper lending and mortgage holidays that could help limit the number of people forced to sell property.
Donnell said: “The outlook for house prices largely depends upon how the Government’s major package of support for business and households reduces the scale of the economic impact.”