Real Estate

UK housing market: march from the scaffold

An Englishman’s home was once his castle. It is now his open prison – and that of the Englishwoman and English sprog too. Property valuations and viewings are not compatible with government advice to stay home. The authorities therefore decided to shut down the housing market completely on Thursday. Banks are withdrawing mortgages. Homes will no longer be advertised. Housebuilders, already one step ahead of them, mostly downed tools earlier in the week. 

A shutdown was already looking inevitable. The government just made it official. Interest in the housing market fell 40 per cent in the week to March 22, according to UK property site Zoopla. The number of sales falling through rose by 60 per cent, it added.

A similar collapse in transactions is expected over the coming months. A government shutdown means there will now be almost none. On the tip of every sheltering homeowner’s tongue is one question: what will happen to house prices? 

Technically the answer is “not a lot” during the coronavirus lockdown. House price indices are calculated either from mortgage approvals or sale completions. As these fall to levels unthought of just a few weeks ago, meaningful index calculation becomes impossible. Halting the market will inevitably prevent a short-term collapse in prices, like circuit breakers used to prevent stock market meltdowns. In the longer term, prices will depend on economic damage from the epidemic and its aftermath. 

Moves to support the self-employed – including most building workers – deserve applause, though delays in payment will hurt them. Share prices of listed housebuilders have almost halved in the past month. These large, financially secure businesses will mostly bounce back. Many of the smaller unlisted contractors that serve them will not.

Government purchasing support and ultra-low interest rates have kept house prices in Britain rising over the past decade, by 50 per cent on average from their post-financial crisis low. How far they will fall when the market eventually reopens depends how well the government bailout of the economy works – including support for brickies who are now out of a job.

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