Buying a house is already stressful enough, especially when you are buying for the first time. As a result, the current Coronavirus is certainly not what you needed right now. Many of you who have been planning to buy a property in the near future might wonder what to expect now regarding the house prices? We’ve already detailed in our previous blog what does the house price depend on? So now, based on that, let’s see how will Coronavirus affect UK house prices?
In one of our previous blog, we’ve explained how does the economic growth affect house prices. Demand for housing is dependent upon income. With higher economic growth and rising incomes, people will be able to spend more on houses; this will increase demand and push up prices.
However, due to the Coronavirus, many businesses and jobs have been put into risk. They are fighting to survive this period and unfortunately they are not able to spend money on houses. As a result, house prices are expected to lower.
Staying at home
This part is related to economic growth as well. Because of the COVID-19, whoever can are working from home, but many people aren’t this lucky. The government is doing a brilliant job to financially support as many businesses and individuals as possible. However, there will always be certain amount of people who are either receiving very small amounts from the support or nothing at all. Unfortunately, this doesn’t help the economic growth.
Coronavirus & house prices: Consumer confidence
It is important for determining whether people want to take the risk of taking out a mortgage. If people fear house prices could fall, they will delay buying. Due to the Coronavirus, our “normal” life had to be put on pause for a while. This situation brings a lot of uncertainty in all aspects of our life. As a result, it’s safe to say that people are not confident with buying a house and it is likely that they will delay buying.
Coronavirus & house prices: Mortgage availability
Since the government has announced the lockdown, many high street mortgage lenders have removed mortgage deals from the market. They have withdrawn their high LTV (loan-to-value) mortgages to instead focus on supporting existing customers through the Coronavirus outbreak, along with processing ongoing applications. According to MortgageFinanceGazette.com there has been a drop of almost two thirds in the number of mortgage products available to borrowers with either 5% or 25% deposits.
A shortage of supply/houses pushes up prices, whereas excess supply will cause prices to fall. According to BBC.co.uk there is a huge housing gap in the UK. This gap – the difference between the current housing stock and the number needed for everyone to have a decent home to live in – is more than one million homes.
In normal conditions, the shortage of houses might make us believe it pushes up the prices. However, due to the Coronavirus, there are less mortgages available, people are uncertain and not confident with buying a house and many people are not working which does not help the economic growth. As a result, we may come to the conclusion that it is likely that the house prices will lower due to COVID-19, although it’s difficult to say anything certain in this uncertain time. One thing is for sure: every day we are getting closer to the end of it and hopefully soon we can enjoy this lovely weather in our new home. Until then: Stay safe.