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Housing market facing ‘major challenge’ as sales set to plummet

The coronavirus outbreak has “put the brakes” on demand for housing, a new report by Zoopla has revealed.

House sales are expected to drop by as much as 60 per cent over the next three months as the property market reacts to the impact of Covid-19, according to the latest UK Cities House Price Index.

Interest from new buyers has fallen dramatically, but the market has not ground to a complete standstill.

Sales continue to be agreed but at a slower rate – down 15 per cent on last week and four per cent below levels recorded a year ago.

But the fall in demand is expected to culminate in a reduction in sales towards the end of the quarter and into the summer months.

House prices are not expected to change materially in the next month or two, according to the report, which states that sales agreed in the last two months are likely to continue to completion.

But the outlook for house prices largely depends on the economic impact of the virus, according to Zoopla’s director of research Richard Donnell.

‘We do not expect any immediate impact on prices’

“We do not expect any immediate impact on prices,” he said. “Beyond this, the outlook for house prices largely depends upon how the Government’s major package of support for business and households reduces the scale of the economic impact.”

He added: “Covid-19 presents a major new challenge – not just for the housing market but for the UK and global economies.

“Fifty years of history show that external shocks have impacted the housing market to differing degrees, largely down to the scale of direct impact on the UK economy.

UK city house price growth in 12 months to February 2020
(Image: Zoopla UK City House Price Index, powered by Hometrack)

“The initial impact of external shocks is to reduce consumer confidence and put a brake on housing demand and the number of people moving home, which we can see in our latest figures.”

Buyer demand over the seven days to 22 March was down 40 per cent on the level recorded the week before, as would-be home buyers paused on major decisions.

Tougher restrictions around people’s movements are also expected to result in a further fall in demand.

Purchases already agreed and moving towards exchange of contract are continuing, but a rapidly growing proportion of sales are starting to fall-through as buyers reassess the necessity of a large financial decision.

Fall throughs last week were 60 per cent higher than the previous week, but new sales agreed currently remain higher than fall-throughs by four to one.

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Mr Donnell says the timing of any rebound in housing market activity depends on when restrictions are lifted, and the extent to which households and businesses are able to return to a “normal way of life”.

He added: “Browsing for homes online is set to continue and, while demand for property may rebound quickly, it will take several months for agents to rebuild new business pipelines.”

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