The UK is now officially in the recession following the coronavirus lockdown, which shut down swathes of UK industry as we sought to fight off the virus. The Office for National Statistics (ONS) revealed last week the economy crashed 20.4 percent in the three months to June, and the UK is officially in recession for the first time since the 2008 financial crash.
GDP plunged as Brits spent less money when shops were forced to close due to the coronavirus crisis, while factory and construction output also fell.
Generally speaking, values fall as incomes are cut and unemployment rises – what we usually see in economically difficult times in a drop in capability and demand, thus lowered prices.
House prices fell off a cliff after the 2008 financial crisis, and it took years for the market to recover.
When sales were effectively banned during the coronavirus lockdown, which prompted fears of a complete market crash that could be difficult to recover from.
But, COVID-19 being the curveball it is, the housing market is actually currently booming.
According to Rightmove, monthly sales agreed in July were the highest seen in ten years, with 29 percent in the first-time buyer sector, 38 percent in the second stepper sector and 59 percent for larger, top of the ladder homes
Miles Shipside, Rightmove director and housing market analyst said: “There have been many changes as a result of the unprecedented pandemic, and these include a rewriting of the previously predictable seasonal rulebook for housing market activity and prices.
“Home movers are both marketing and buying more property than we have recorded in any previous month for over ten years, helping push prices to their highest ever level in seven regions.
Will house prices drop in 2021?
Property prices across the country are set to continue falling over the next couple of years, research by the Centre for Economics and Business Research has suggested.
The CEBR thinks the steepest drop in house prices will emerge in the final quarter of this year, once the Government’s Job Retention Scheme comes to and end and mortgage payment holidays are stopped
Property prices are expected to rise again in the third quarter of 2021, but ‘a V-shaped recovery in the housing market is not expected’, the CEBR has indicated.
The think-tank believes the stamp duty holiday will shave off around £4,400 from the average property sale, prompting a 6 per cent increase in transactions, equating to an extra 41,000 additional sales between now and 31 March.
Around 60,000 property sales could also be brought forward from later in the year.
Estate agency Knight Frank thinks house prices could fall by seven percent this year, while the EY Item Club is forecasting a three percent drop over the next few months, before stability resumes at the turn of the year.