"The impact on the housing market will ultimately be less than would normally be associated with an economic shock of this magnitude."
As a result, the annual rate of house price growth slowed to 1.8%, from 3.7% in April.
Robert Gardner, Nationwide's chief economist, said: “In the opening months of 2020, before the pandemic struck the UK, the housing market had been steadily gathering momentum. Activity levels and price growth were edging up thanks to continued robust labour market conditions, low borrowing costs and a more stable political backdrop following the general election.
“But housing market activity has slowed sharply as a result of the measures implemented to control the spread of the virus. Indeed, data from HMRC showed that residential property transactions were down 53% in April compared with the same month in 2019.
“Mortgage activity has also declined sharply. Nevertheless, our ability to generate the house price index has not been impacted to date, as sample sizes have remained sufficiently large (and representative) to generate robust results.
“Low transaction levels may still make gauging price trends difficult in the coming months – especially for regional indices, which by their nature have lower sample sizes.
“The medium-term outlook for the housing market remains highly uncertain, where much will depend on the performance of the wider economy.
“We have already seen a sharp economic contraction as a result of the necessary measures adopted to suppress the spread of the virus. Indeed, the 5.9% decline in UK economic activity recorded in March was only a little less than the decline recorded over the entire financial crisis.
“However, the raft of policies adopted to support the economy, including to protect businesses and jobs, to support peoples’ incomes and keep borrowing costs down, should set the stage for a rebound once the shock passes, and help limit long-term damage to the economy.
“These same measures should also help ensure the impact on the housing market will ultimately be less than would normally be associated with an economic shock of this magnitude.”
Tomer Aboody, director of MT Finance, commented: "With the full impact of lockdown measures being felt during the period covered by this report, it’s not surprising to see these artificial numbers. It’s not a fair reflection of the market and sentiment but purely a result of necessary measures taken by the government to deal with the pandemic.
"Once lockdown is over, would-be buyers should regain their confidence to move. A stimulus from the government has to happen, especially with regard to reduction of stamp duty or its possible removal for some months.
"Banks are eager to lend, with liquidity extremely high. Interest rates are at an all-time low and agents are reporting a positive uptick in applicants registering, which are all positive signs."
Lucy Pendleton, property expert at James Pendleton estate agents, added: “This market only restarted half way through May so this jolt in house prices will likely have been caused by those vendors most keen to sell and willing to negotiate on price to get things moving quickly.
“A wave of gazundering has hit the market in the past fortnight but these buyers have been left feeling a little deflated. The vast majority of those who thought they would grab a bargain post-lockdown haven’t.
“Since the market burst back into life half way through the month, 79% of buyers who had already agreed purchases before lockdown tried to reduce their price. Most succeeded but not on the scale they were expecting. In all, 99% of them failed to achieve a reduction of more than 2.5%. The only exception has been a 6% reduction achieved on a house that had been listed for sale at £2.5m.
“Of the remaining 9% of properties where buyers were unsuccessful in winning a reduction, all have received acceptable offers from new buyers, and 63% of these have been for higher amounts than before.
“The weight of the attack on sale prices agreed before lockdown has caught us a little by surprise but it’s still very early days and prices are showing a great deal of resilience. In fact, new properties hitting the market are being listed at roughly the same level as pre-lockdown valuations.
“Activity levels are impressive across the board too. Last week, on an annual basis, viewings were up 15%, the number of offers being received was up 10%, new sale instructions were up 30% and new buyer registrations were up 5%.”
