How will the coronavirus outbreak affect house prices?

The UK property market has enjoyed an uplift over the past few months, but the coronavirus outbreak could result in price increases slowing down as fewer people buy and sell homes.

Here, Which? explains what’s happened in the property market so far this year and offers advice on whether homeowners should be concerned about a fall in house prices.

The property market in 2020

Last year we saw a slowdown in house price increases and the number of sales going through, but the property market has enjoyed a big boost since December’s general election.

Data from HM Revenue & Customs shows that the number of residential property transactions increased by 12.7% year-on-year in January, with 102,810 sales going through.

This echoed findings from the property portal Rightmove, which said traffic to its site increased by 7% and the number of sales agreed rose by 12% in January.

And earlier this week, the Royal Institute of Chartered Surveyors said house price inflation is gathering pace amid greater demand from buyers.

What’s happened to house prices?

The most reliable barometer of house prices is the Land Registry’s UK House Price Index.

The most recent data only goes up to December, when it found that overall prices rose 0.3% month-on-month and 2.2% year-on-year. January’s index will be published next week.

The mortgage lender Halifax also publishes its own house price index, but its accuracy has come under question.

On Friday, it announced that house prices rose by 0.3%, marking a 2.9% increase in the last quarter.

Will the coronavirus affect house prices?

It’s too early to say exactly what impact the outbreak will have on the property market, but this is likely to mirror the rest of the economy.

A rise in the number of people self-isolating could mean fewer properties becoming available, and thus fewer buyers viewing and bidding on homes.

In short, more people will be staying put for longer.

Fewer transactions could see house price growth slow right down, but it’s highly unlikely we’ll see any major crash in prices, and – as with Brexit – the market will eventually pick up pace again after a period of uncertainty.

If nerves do creep into the market, buyers and sellers seeking to move home imminently could face struggles due to a lack of homes on the market.

Will estate agents still hold viewings?

Mark Hayward of NAEA Propertymark, a trade body for estate agents, told Which? that estate agents will need to operate differently, and buyers and sellers must adopt a ‘pragmatic and planned approach’.

He says: ‘Typically spring would be the time to see an influx of properties coming to the market, but this may be restricted in the short and long term.

‘As the current situation continues to evolve, it’s likely more agents will move to virtual viewings.

‘This week, we’ve recommended our member agents offer 360-degree viewings, or if this isn’t viable, offer to show properties via video call or recorded film.’

Coronavirus and your mortgage

If you’re looking to move home or renovate your current property, the good news is that it’s a great time to get a mortgage.

Mortgage rates are currently very low, and the Bank of England’s decision to cut the UK’s base rate from 0.75% to 0.25% on Wednesday may help some buyers and switchers.

It’s highly unlikely that the very cheapest mortgage rates will drop much further in light of this announcement, but many borrowers on tracker deals will see their rates fall, and those with small deposits might find it easier to secure a better rate.

Find out which banks and building societies have cut their rates in our full story.

How are lenders helping homeowners?

On 17 March, the government announced that homeowners affected by the coronavirus will be able to benefit from mortgage repayment holidays of up to three months.

Borrowers worried about financial hardship should contact their lender directly to discuss their options, which could also include temporarily deferring interest payments, extending the term of the mortgage or moving to an interest-only basis for a short time.

Check out our full article on what the coronavirus means for your mortgage to find out more.

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