UK Residential Transactions to Dip 15 Percent in 2020 from COVID Outbreak
International property consultant Knight Frank is reporting that over the last four months, the UK property market has experienced the most abrupt change in sentiment in its history. While the market was shut for eight weeks against the disorientating backdrop of a global pandemic, the prophecies about the housing market were understandably dire.
However, monthly house price growth had reached a 16-year high. That followed mortgage approval data from the Bank of England that looked distinctly like a V-shaped recovery. Furthermore, the number of exchanges outside of London was the 9th highest figure in 10 years in the last week of August 2020.
While evidence of a recovery is building, valid warnings about the unknown economic impact of the pandemic remain. Some economists point to further job losses and financial pain as the furlough scheme is unwound. Others, however, point to an economy that is more adaptable than assumed and a narrative more complex than one of High Street closures and GDP numbers.
Against this backdrop, Knight Frank has updated its UK property market forecasts.
While unemployment will rise and some form of second wave of Covid-19 will occur, our central scenario remains that double-digit price falls will not take place. The outlook has been further boosted by the announcement of a stamp duty holiday in July.
Other factors will keep upwards pressure on prices. Political uncertainty and an ever-shifting tax landscape have kept house price inflation in check in recent years, widening the scope for prices to rise. Furthermore, ultra-low
interest rates will limit the type of forced selling that pushed prices down following the global financial crisis.
The government also appears more interested in the wider economic benefits of a stamp duty holiday than the political benefits of successive hikes.
In short, this does not feel like a re-run of 2008/09 for the UK property market, says Knight Frank.
Based on a market analysis that includes listings data, Knight Frank forecast UK property transactions will fall by 15% this year compared to 2019. The month-on-month decline has climbed from a low-point of -57% in April. August was unseasonably busy and the fourth quarter could benefit from a similar trend.
In relation to prices, the overall picture is broadly flat with slight upwards movement in areas with more outdoor space and greenery. We do not expect a material change to these trends during the rest of the year, with most of the annual decline having been priced in during the second quarter of the year.