Property & Mortgages

Over half a million UK property sales to be lost as the market freezes


Transactions will fall from 1.18 million last year to 734,000 as a result of the Covid-19 pandemic, according to Knight Frank

More than half a million property sales will be lost this year as the market freezes and prices fall by 3 per cent, an estate agency has warned.

Knight Frank believes that transactions will fall from 1.18 million last year to 734,000 as a result of the Covid-19 pandemic. The government has effectively blocked new sales by decreeing that viewings are not allowed during the lockdown.

The property seller has used a relatively benign forecast of a recession costing 4 per cent of GDP this year followed by growth of 4.5 per cent in 2021, assuming that the lockdown remains in place through April and May before a gradual lifting in June.

Under such a scenario, it expects house prices to fall by 3 per cent this year but to bounce back in 2021 with growth of 5 per cent. London prices will fall by 2 per cent this year, it says, but prime London homes will hold steady after the 25 per cent fall since 2014.

Before the pandemic, the housing market was shaping up for a good year. Knight Frank said: The political certainty provided by last December’s general election meant that the housing market was in a strong position.

It had noted a sharp rise in sales and price growth and as a result had forecast an increase this year to 1.26 million transactions. Of those, it now expects 526,000 sales to be lost and “less than half” of those to be carried into next year.

Knight Frank’s outlook is more upbeat than others. Last week Bank of America Merrill Lynch said that house prices would fall by 10 per cent this year.

Liam Bailey, global head of research at Knight Frank, said that the impact of the pandemic would be felt all year as “the dislocation in the jobs market and weakened consumer sentiment will impact on prices”, although “the relatively finite timespan of the crisis means declines will be limited”.

He added: For the government to see a full recovery of the market, with all of these lost sales carried forward, there will be a need for substantial incentives to ease market liquidity, including a reduction in stamp duty.

Residential landlords want the government to make clear that tenants should expect to pay their rent because of concerns that tenants believe that they have been given a rental holiday. The National Residential Landlords Association has been contacted by some members saying that their tenants believe that they no longer have to pay rent because of the pandemic. Some tenants think that because lenders have provided the option of a three-month mortgage payment holiday to landlords, they should not pay rent for this period. Groups including the National Union of Students are also campaigning for rent breaks.

The NRLA is asking the government to clarify its guidance that tenants must still meet their contractual obligations and that rents should continue to be paid where possible.

Ben Beadle, its chief executive, said: The mortgage repayment holiday is only available for landlords who are struggling to make their payments because tenants are unable to pay as a direct result of coronavirus. This is not a green light to tenants everywhere to stop paying their rent.

As 94 per cent of private landlords let property as individuals and 39 per cent have reported a gross income of less than £20,000, many depend on the rental income for their livelihood, the NRLA said,

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