A respected estate agency has revised downwards its price forecast for the housing market for the second time since the start of the Coronavirus crisis.
At the start of the year, in line with most commentators, Knight Frank was anticipating a buoyant market following the decisive December General Election result and the end of Brexit uncertainty.
However, after the Coronavirus hit the country the agency - in early April - offered a more muted assessment of the market for 2020.
But this in turn was based on something like a full lifting of the UK’s lockdown being achieved by the end of May.
As a result of the Prime Minister’s announcement on Sunday, and subsequent statements, Knight Frank says it’s clear the lockdown will run in stages through to at least July - hence the second revision of the forecast for the housing market.
“Our view is that a decline of 7.0 per cent in UK prices and 5.0 per cent in prime London and prime regional prices will be experienced through 2020, with much of this decline already having taken place between March and May” the agency revealed last evening.
It says that it is now clear that the UK and the rest of the western world will see one of the sharpest falls in economic growth in peacetime. Less obviously, there is no certainty as to the speed and scale of recovery.
“If the UK appears to be struggling to navigate a way out, the lesson from Singapore, South Korea and even Germany, confirms that almost everywhere is experiencing two steps forward and one step back when it comes to easing movement restrictions” says the agency, emphasising the difficulty in making a forecast.
Viewings are down 98 per cent with the remaining two per cent being virtual; new buyer volumes are lower by 60 per cent over the same period; new properties listed for sale are down 90 per cent; offers made, down 80 per cent; offers accepted, down 70 per cent and exchanges are down the same amount.
But there is some brighter news.
“In terms of transactions, we noted that there were 1.18m sales in the UK in 2019. Prior to the arrival of Covid-19 we had assumed the Boris Bounce would lead to an increase this year to around 1.26m” says the agency’s global head of research, Liam Bailey.
"During January and February even this increase began to look modest. However, with the arrival of Covid-19 we reduced our forecast to 728,000 sales for this year, a decline of 38 per cent on 2019 levels. This new total represented around 500,000 missing sales compared to what we had initially expected” he continues.
But now Bailey says that looking at the volume of activity that has occurred through lockdown it might be that his transaction forecasts were slightly pessimistic.
“More sales have taken place, and fewer sales have failed to complete, compared to what we initially expected. For now, we are content to leave our initial forecast unchanged” he says.
And Bailey concludes: “Our view is that as the market reopens in the next two months the 5.0 per cent fall in values we have seen since late March will be revealed in achieved pricing – and while there could be some further downward pressure through to the summer it is likely to be limited – and in prime London there is the potential for an uptick in the final two quarters of the year to offset some of the losses in the first half.”