House prices in the UK are still falling, with the latest Halifax house prices index recording a fall of 0.1 per cent in June – the fourth consecutive month of declining property values. This confirms expert prediction of a house market slump, with the downward trend likely to continue well into 2021. The question now is: how much further will house prices drop, and how long will the downturn last?
A four-month downward trend in house prices has not been observed since 2010, in the aftermath of the financial crisis. Does this mean that it will once again take the property market over two years to recover from the financial blow, albeit this time delivered by Covid-19?
Halifax are unequivocal in predicting a further decline not just for the immediate future, but for the medium term, although so far they have avoided giving numeric estimates.
Russell Galley, Managing Director of Halifax, says, ‘The near-term outlook points to a continuation of the recent modest downward trend in prices through the third quarter of the year, with sentiment indicators, based on surveys of both agents and households, currently at or around multi-year lows.
‘Of course, come the autumn, the macro-economic landscape in the UK should be clearer and the scale of the impact of the pandemic on the labour market more apparent. We do expect greater downward pressure on prices in the medium-term, the extent of which will depend on the success of government support measures and the speed at which the economy can recover.’
It is still unclear what – if any – government support measures there will be for workers after October, when the current Job Retention Scheme ends. Mass job losses are already apparent, with thousands of redundancies announced last week by the retail industry alone.
Until now, expert opinion focus almost solely on 2020, with medium-term prognoses deemed too unreliable to make at this point. But the pessimistic outlook for the housing market now includes 2021, with 2023 named by Halifax as the year the property market might return to its pre-coronavirus levels.
The Centre for Economics and Business Research (CEBR) has issued a much starker prognosis for the housing market, predicting a further five per cent fall this year, and a further 10.6 per cent fall in 2021. That is an even more dramatic slump than the 11 per cent decline the CEBR were predicting at the start of the pandemic back in March.
This is despite the fact the Rishi Sunak has just announced a stamp duty holiday, which should boost property transactions somewhat.
Even so, as the think tank’s spokesperson explains in an interview with This Is Money, ‘We do expect that prices will be affected to some extent by the stamp duty holiday, but not enough to offset the negative pressures on house prices brought about by an expected rise in unemployment and the ending of mortgage payment…