House prices may fall 14% this year, says Nationwide, as recession hits and people stall on moving after lockdown
Nationwide building society expects house prices to fall 13.8 per cent this year as people delay home moves.
The chief executive of Britain’s second largest mortgage lender said first-time buyers and those stepping up the ladder into their second home would be deterred from purchasing in the midst of a recession.
Joe Garner told The Mail on Sunday that he expected prices to bounce back after the dip. ‘We do think it is inevitable that there is some kind of recession, but over the long term, property prices have always trended upwards,’ he said.
Slowdown: Nationwide said first-time buyers and those stepping up the ladder into their second home would be deterred from purchasing in the midst of a recession
‘The home mover and the first-time buyer segments of the mortgage market are likely to be suppressed. We’ve taken some forecasts that are conservative compared to some.’
The building society is also predicting a 9.6 per cent decline in GDP, with unemployment rising to 7.4 per cent.
The average cost of a home across the country was up 3.7 per cent annually, in April, according to the Nationwide house price index. At a record high of £222,915, the average house price is more than £3,330 above its level a year ago.
May’s house price index from the building society is due this week.
Nationwide’s internal research also found that some families were looking to move into larger homes after months of lockdown.
It said some were keen to move into homes with a garden or with extra space for a home office. Some wanted to buy properties closer to high street shops.
Garner said the Nationwide was seeing huge demand from customers looking to remortgage their homes following the base rate cut from the Bank of England.
It is also preparing for a surge in the number of customers looking for equity release products and retirement interest-only mortgages.
Average UK house prices kept rising since the end of last year, but the Office of National Statistics has now suspended the index due to disruption by the coronavirus crisis
House prices were picking up before coronavirus crisis
House prices and sales continued to rise in the build-up to the coronavirus lockdown, official figures show.
House prices across the UK rose 2.1 per cent, or £5,000, in the year to March to an average of £232,000, according to the figures released jointly by the ONS and the Land Registry.
House price forecasts
Bank of England: Fall of 16%
Nationwide: Fall of 13.8%
Cebr: Fall of 13%
Savills: 5 to 10% fall on thin sales
Liberum: Fall of 7% in real prices
Lloyds Banking Group: 5 to 10% fall
EY’s Howard Archer: Fall of 5%
Knight Frank: Fall of 7%
But after the property market freeze crashed sales, the Office of National Statistics will now suspend its house price index until further notice.
Reports showed renewed confidence in the property market after the decisive General Election, but the so-called Boris Bounce was brought to an abrupt halt by the coronavirus pandemic.
Analysts now suggest house prices will fall, with predictions ranging from Lloyds’ Banking Group’s 5 to 10 per cent fall, to Knight Frank’s 7 per cent decline and the Bank of England warning of a potential 16 per cent drop.
A recent Royal Instiution of Chartered Surveyors report said that 80 per cent of its member estate agents had seen previously agreed sales fall through during lockdown.
Many buyers who are still going ahead with purchases agreed before the coronavirus crisis hit are now looking to renegotiate on the price to reflect the effect on their personal finances and prospects and on the economy.
Buying agent Henry Pryor said: ‘Most buyers will feel that they are taking a risk and will want a discount to recognise that.’
‘Whilst many will hope for 20 per cent off the asking price, most I suspect will settle for 5 to 10 per cent. Whether this will be enough come Christmas is anyone’s guess.’