The coronavirus pandemic has caused property prices to tumble
UK house prices have fallen the most in 11 years due to the coronavirus outbreak hitting the property market.
Annual house price growth slowed to 1.8% in May – down from 3.7% in April, according to the latest Nationwide House Price Index.
On a monthly basis, house price growth fell by 1.7% after a gain of 0.9% in April, taking the average UK house price to £218,902. This makes it the largest monthly fall since February 2009.
The ban on viewing properties and moving home because of the coronavirus pandemic brought the housing market to a grinding halt in March.
Estate agents, buyers and surveyors were banned from visiting properties, and around £82 billion in house sales were put on hold.
However, the Government has now eased these rules, allowing the housing market to start up again.
Nationwide says the medium-term outlook for the housing market remains highly uncertain, with much depending on the performance of the wider economy.
Robert Gardner, Nationwide's chief economist, says: “We have already seen a sharp economic contraction as a result of the necessary measures adopted to suppress the spread of the virus.
“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."
Data from HM Revenue and Customs shows that house purchases were down 53% in April compared with the same month last year.
Early indicators of housing demand have picked up since in-person property viewings were permitted again.
The daily volume of Google searches for the three main property portals, Rightmove, Zoopla and OnTheMarket, has picked up to just 13% below its pre-lockdown level, having been down 50% in April.
Mortgage holiday extension
The Financial Conduct Authority has confirmed the deadline for mortgage holidays has been extended until October 31 for homeowners either coming to the end of a payment holiday or who are yet to request one.
The financial watchdog is also reminding customers they should resume payments if they can.
Other options may include making a proportion of their monthly payment, or temporarily switching to an interest-only mortgage.
Homeowners can also extend the term of their homeloan in order to bring their monthly repayments down.
Economists believe the impact of the lockdown on incomes will continue to weigh on the market for the rest of the year.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, expects property prices to fall 5% by the end of the third quarter.
He says: “The huge size of the blow from Covid-19 to households’ incomes and the deterioration in consumers’ confidence suggests that house prices must drop.
“Relatively few people likely will be forced to sell their homes, given that mortgage payment holidays are easily available and home ownership has declined."