House sales are set to plunge by as much as 60% over the next three months, as the market reacts to the impact of Covid-19, a report suggests.
Research modelling by property website Zoopla indicates a fall in transaction volumes of up to 60% over the second quarter of 2020, compared with same period in 2019.
Some individual months this spring may even see newly-agreed sales down by up to 80% on last year, given the shutdown of normal life and knock-on impact for the market, Zoopla suggested.
Covid-19 presents a major new challenge - not just for the housing market but for the UK and global economiesRichard Donnell, Zoopla
Low sales volumes are also expected to continue into the third quarter.
Richard Donnell, director of research and insight at Zoopla, said: “Covid-19 presents a major new challenge – not just for the housing market but for the UK and global economies.
“Fifty years of history shows that external shocks have impacted the housing market to differing degrees, largely down to the scale of direct impact on the UK economy.
“The initial impact of external shocks is to reduce consumer confidence and put a brake on housing demand and the number of people moving home, which we can see in our latest figures.”
Before the outbreak, the housing market had got off to its strongest start for four years, according to the UK cities house price index from Zoopla.
But it said the social distancing strategy introduced to limit the spread of the coronavirus had created an immediate impediment to property viewings and valuations, which are integral to buying and selling a home.
The number of previously agreed house sales falling through is also gathering pace, as wider economic uncertainty prompts people to think again.
But the market has not ground to a complete standstill, as sales continue to be agreed, albeit at a slower rate, down 15% on last week.
Buyer demand over the seven days to March 22 was down 40% on the level recorded one week prior, Zoopla said, as would-be home buyers took stock of unfolding events in the UK and around the world.
It said the toughened restrictions announced this week would see demand fall further in the weeks ahead.
The report said purchases already agreed and moving towards exchange of contract were continuing, but a “rapidly growing” proportion of sales were starting to fall through, as buyers reassessed the necessity of a large financial decision.
Fall-through cases last week were 60% higher than the previous week, but Zoopla added that new sales being agreed still remained higher than fall-throughs by some margin.
For those with homes already listed for sale, there was not an immediate rush to withdraw their home from the market, particularly for those whose agents could offer “virtual viewings”, the report said.
We do not expect any immediate impact on prices. Beyond this, 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 impactRichard Donnell, Zoopla
But the report conceded that a proportion of sellers would withdraw their home for a period, or at least discuss different marketing options with their agent.
Zoopla added that, while sales were expected to see a sharp drop-off, house prices were not expected to change materially in the next month or two, particularly as a proportion of sales agreed in the past couple of months would continue to completion.
The report also highlighted Government and lender action to support businesses and home owners with mortgage payments.
Those in financial hardship will be offered three-month mortgage payment holidays. And the Bank of England has slashed interest rates to a new low, helping to reduce costs for some borrowers.
Mr Donnell explained: “Levels of property transactions are typically more volatile than changes in house prices.
“We do not expect any immediate impact on prices. Beyond this, 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.
“Low mortgage rates mean forbearance will remain the preferred choice for lenders, but further Government support in these unique times cannot be ruled out.”
Looking further ahead, Mr Donnell said: “The timing of any rebound in housing market activity depends upon when new restrictions are lifted, and the extent to which households and businesses are able to return to a normal way of life.
“Browsing for homes online is set to continue and, while demand for property may rebound quickly, it will take several months for agents to rebuild new business pipelines.”