The latest Nationwide House Price Index has revealed prices are down 1.7% month on month. However, they are still 1.8% higher on an annual basis. Is this just a blip or a sign of things to come?
Given the impact of the COVID-19 outbreak on the UK property industry, it’s no surprise to see a negative number in the latest Nationwide House Price Index. From this writer’s perspective, the numbers were broadly in line with what I expected.
The UK property market has been paralyzed for months, and mortgage lending has been greatly restricted. The big question is whether this is the beginning of something worse or just a minor blip.
To fully understand which direction the property market is heading, we need to look past sensationalist headlines from the property doom-mongers in the UK press of which there are many and talk to people with boots on the ground.
Over recent weeks, I’ve taken the opportunity to talk to many non-city based agents, and they’ve seen a huge spike in the number of enquiries and are starting to put significant deals together.
Some in the property industry have predicted a double-digit drop but do say there is likely be a rapid bounce-back. I’m far more optimistic about the near-term future of the market given the lack of new stock and the ever-present demand.
We should also consider the increased number of people now seeking to move away from heavily-urbanised and populated areas to something a little more spacious and tranquil. I am confident this will be reflected in the next set of numbers from the Nationwide and the outlook will look decidedly different from what are seeing now.
Let’s ask three experts what they make of the latest Nationwide House Price Index numbers:
James Forrester, managing director of Barrows and Forrester:
“You may well smell blood and believe that the sharks are circling. But before you jump in and join the doom-fest remember that these numbers are taken from the depths of a closed property market. A market that is now open again and beginning to stretch its powerful legs.
Any predictions of the demise of the UK property market will turn out to be greatly exaggerated. Moreover, the property market is no longer ‘London led’ but a patchwork of micro-markets and I suspect that the regions will continue to lead the way on growth out of the Covid crisis given the exceptional value for money that the West Midlands and the like represent’.
Marc von Grundherr, director of Benham and Reeves:
“From scant transactional data it’s impossible to know if this is the beginning of a trend or just a blip. Doomsayers will seize on this as a sign of property market Armageddon yet estate agents and portal sites are reporting high levels of traffic, enquires, viewings and sales. A blip, me thinks”
As I mentioned at the beginning of this article, mortgage lending has been greatly restricted in the UK. With the latest Bank of England mortgage figures showing a fall in approvals to 15,800 in April, around 80% lower than the February, we asked Hugh Wade-Jones, the Managing Director of Enness Global Mortgages for his thoughts on the current state of the market:
“The latest figures present a dramatic decline across the market with both lender and buyer activity evaporating at a greater rate than forecast. But before we head for the hills, it’s important to remember that this data only provides a snapshot of market conditions and one that was taken in the midst of a full market shutdown.
You wouldn’t cut someone down at the knees and expect them to run a marathon and quite frankly, it’s a wonder that any mortgages were approved at all let alone funds deployed.
So while the UK property market may be experiencing an out of body experience due to an abrupt reduction in activity, it’s far from being pronounced and although it may take a month or two to see a recovery materialise, early indicators at ground level suggest there is plenty of life in it yet.”
All of the expert’s opinions are broadly in line with my own thoughts. The key point being it is too early for anyone to draw a longer-term view from numbers produced during a lockdown.
Before we can make any assumptions as to where property prices are heading, we need to see more numbers. The doom-mongers could see their dreams come true; however, given the increase in activity I am hearing about from people working in the industry, I am looking at the negative numbers as a bump in the road.
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