House prices to fall by 13% as coronavirus lockdown hammers incomes
House prices could fall by an average of as much as 13 per cent by the end of this year as the coronavirus crisis hits incomes hard, according to a report out today.
The Centre for Economics and Business Research (CEBR) said the economic impact of the lockdown measures has “tremendous potential” to disrupt the UK’s housing market.
It forecast that a lack of transactions, high uncertainty and falling incomes will lead to a sharp fall in prices.
Research from the Cambridge-INET institute last week estimated that average UK workers can expect to face a 35 per cent loss of income over the next four months.
Once households burn through any emergency savings, they will have to make tough choices on where to cut down expenditure.
The CEBR points out that housing costs are the single biggest item for most households.
Last week, the organisation also published analysis showing that UK economic activity under lockdown is down by 31 per cent.
“Although the government has offered up a vast package of support, this lack of demand will mean some businesses cease to operate, many workers will lose their jobs and a lot more will face a cut in incomes,” it said.
Although the CEBR said the scale of the crisis means every region will be affected, it also said the impending loss of jobs and incomes won’t be evenly spread across the country.
Areas with high concentrations of workers in sectors such as the manufacturing, construction, retail, accommodation and food services and other services sectors badly affected by social distancing measures are likely to be worst hit.
The research also said that the crisis will have different impacts on renters and those with a mortgage. The private rental sector could be particularly exposed with 47 per cent of private renters under the age of 35 and studies showing that those under 30 are much more likely to have already lost their job or be on reduced hours.
Even a temporary reduction in incomes could lead to tenants becoming unable to pay their rent, making the private rented sector the catalyst of the impending housing crash.
The latest Royal Institute of Chartered Surveyors’ housing market report last week found that expectations of house sales and prices had fallen steeply among property professionals in Scotland.
Although house prices are widely expected to fall, Sarah Coles, personal finance analyst at Hargreaves Lansdown, said it was important to bear the longer-term picture in mind.
“Homeowners who lived through the 1989 crash will tell you that as long as you’re prepared to be patient and sit tight, prices will recover again,” she pointed out.
Coles said a property bought at the peak in 1989 is on average now worth more than three times as much as the sum initially paid.
A message from the Editor:
Thank you for reading this story on our website. While I have your attention, I also have an important request to make of you.
With the coronavirus lockdown having a major impact on many of our advertisers - and consequently the revenue we receive - we are more reliant than ever on you taking out a digital subscription.
Subscribe to scotsman.com and enjoy unlimited access to Scottish news and information online and on our app. With a digital subscription, you can read more than 5 articles, see fewer ads, enjoy faster load times, and get access to exclusive newsletters and content. Visit https://www.scotsman.com/subscriptions now to sign up.
Our journalism costs money and we rely on advertising, print and digital revenues to help to support them. By supporting us, we are able to support you in providing trusted, fact-checked content for this website.
Want to join the conversation? Please or to comment on this article.