"The timing of any rebound in housing market activity depends upon when new restrictions are lifted, and the extent to which households and businesses are able to return to a normal way of life."
Covid-19 has led to a 40% drop in demand for housing over the past week and completed housing transaction volumes are set for a decline of 60% over Q2, according to research from Zoopla.
Its figures show that the housing market got off to its strongest start for four years in January and February. Average annual house price growth was at 1.6% across UK Cities in February as market momentum gathered pace in the wake of the General Election.
With a strong start to the year, levels of demand are now below where they were a year ago, but Zoopla says the tougher restrictions announced this week will see demand fall further in the weeks ahead.
Its data shows that fall throughs last week were 60% higher than the previous week, but new sales agreed currently remain higher than fall-throughs by four to one.
Interest from new buyers has fallen dramatically, but the market has not ground to a complete standstill. Sales continue to be agreed, albeit at a slower rate, down 15% on last week and 4% below levels recorded a year ago.
A fall in demand is expected to culminate in a reduction in sales agreed towards the end of the quarter and into the summer months, given the time lag between marketing a home to agreeing a sale and completing a transaction.
Zoopla Research modelling indicates a fall in transaction volumes of up to 60% over the second quarter of 2020, with low transaction volumes expected to continue into the third quarter. Zoopla says individual spring months may see newly agreed sales down by up to 80% on last year given the shutdown of normal life and knock on impact for the market.
Richard Donnell, director of research and insight at Zoopla, said: “Covid-19 presents a major new challenge - not just for the housing market but for the UK and global economies. Fifty years of history shows that external shocks have impacted the housing market to differing degrees, largely down to the scale of direct impact on the UK economy.
“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. Levels of property transactions are typically more volatile than changes in house prices.
“We do not expect any immediate impact on prices. 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. Low mortgage rates mean forbearance will remain the preferred choice for lenders, but further Government support in these unique times cannot be ruled out.
“The timing of any rebound in housing market activity depends upon when new restrictions are lifted, and the extent to which households and businesses are able to return to a normal way of life. 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.”