UK house prices fell by 1.7 per cent in May, after taking account of seasonal effects – this is the largest monthly fall since February 2009.
As a result, the annual rate of house price growth slowed to 1.8 per cent, from 3.7 per cent in April.
The figures come from the Nationwide whose chief economist Robert Gardner says: “In the opening months of 2020, before the pandemic struck the UK, the housing market had been steadily gathering momentum. Activity levels and price growth were edging up thanks to continued robust labour market conditions, low borrowing costs and a more stable political backdrop following the general election.
“But housing market activity has slowed sharply as a result of the measures implemented to control the spread of the virus. Indeed, data from HMRC showed that residential property transactions were down 53% in April compared with the same month in 2019. Mortgage activity has also declined sharply.
"Nevertheless, our ability to generate the house price index has not been impacted to date, as sample sizes have remained sufficiently large and representative to generate robust results. Low transaction levels may still make gauging price trends difficult in the coming months – especially for regional indices, which by their nature have lower sample sizes.”
The Nationwide says recent market research conducted on its behalf suggested that around 12 per cent of the population had put off moving as a result of the lockdown.
Many viewed the current situation as a temporary pause in the market, with would-be buyers now planning to wait six months on average before looking to enter the market.
Gardner continues: “Peoples’ housing preferences may also be impacted. Indeed, circa 15 per cent of people surveyed said they were considering moving as a result of life in lockdown, with a third stating they think differently about their home as result of the Covid-19 outbreak, especially the importance of a garden and the need for more indoor space.”
In the medium-to-longer term, Gardner says the housing market’s performance depends in that of the wider economy.
“We have already seen a sharp economic contraction as a result of the necessary measures adopted to suppress the spread of the virus. Indeed, the 5.9 per cent decline in UK economic activity recorded in March was only a little less than the decline recorded over the entire financial crisis.
“However, the raft of policies adopted to support the economy, including to protect businesses and jobs, to support peoples’ incomes and keep borrowing costs down, should set the stage for a rebound once the shock passes, and help limit long-term damage to the economy.
“These same measures should also help ensure the impact on the housing market will ultimately be less than would normally be associated with an economic shock of this magnitude.”