Coronavirus sparks biggest monthly fall in UK house prices since 2009

Tom BelgerFinance and policy reporter
Yahoo Finance UK
Homes in Norwich as property prices drop. (PA)
Homes in Norwich as property prices drop. (PA)

UK house prices saw their steepest monthly fall in May since the global financial crisis more than a decade ago, new figures suggest.

Lender Nationwide’s closely followed house price index showed the average UK property price drop more than £4,000 between April and May as the coronavirus lockdown dramatically curbed activity.

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Separate official figures released on Tuesday also showed mortgage approvals in April slumped to their lowest levels since a survey began in 1993.

The pandemic has brought an abrupt end to the recovery in property prices and activity seen since prime minister Boris Johnson’s election victory in December.

Market activity slowed to a trickle for much of the lockdown as the UK government urged against house moves, with many estate agents shutting their doors and physical viewings and valuations off the cards.

The government lifted restrictions in England in May, but the severe economic downturn is taking its toll on the market and prices are widely expected to fall further.

READ MORE: UK homeowners can apply for a new or second mortgage holiday until November

Nationwide figurs show a May month-on-month decline of 1.7%, to an average price of £222,915 on properties lent on by the building society.

Robert Gardner, Nationwide's chief economist, said it was the largest monthly fall since February 2009. On an annual basis, the rate of price growth slowed from 2.7% in April to 1.8% in May.

“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,” he said. “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.”

READ MORE: UK house price growth slowed even before the lockdown

He added: “The medium-term outlook for the housing market remains highly uncertain, where much will depend on the performance of the wider economy.”

Bank of England figures released separately on Tuesday showed mortgage approvals falling to 15,800 in April, down 80% on February levels and and almost half the levels at the worst of the global financial crisis.

Approvals for remortgages with new lenders also dropped by 34% on February to 34,400 in April.

Estate agents suggested activity and prices had held up more than expected, however. “The market all but stopped dead overnight when the lockdown was imposed and so a -1.7% could arguably be viewed as a positive, all things considered,” said James Forrester, managing director of Birmingham estate agent Barrow and Forester.

‘Since it has reopened, estate agents and portal sites are reporting high levels of traffic, enquiries, viewings and sales.”

Lucy Pendleton, of London estate agent James Pendleton, said many buyers “who thought they would grab a bargain” as restrictions eased, had not been able to do so. “A wave of gazundering has hit the market in the past fortnight but these buyers have been left feeling a little deflated.”

But Ross Counsell, director of Leeds-based property buying firm Good Move, said the most important shift so far had bee in buyers’ and sellers’ expectations of the market given the economic crisis. He said sellers “will begin to adjust their expectations on the price they will achieve.” Good Move expects house prices to bounce back despite the downturn, but flats to take much longer to recover.

Meanwhile buyers were also placing increased importance on features such as outdoor space, according to Counsell.

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