Will the coronavirus affect UK house prices?
Experts predict a three-percent drop in housing prices during the year and advise sellers to delay the purchase, writes The Telegraph.
Buyers of housing will be concerned about parallels between the current situation and the financial crisis.
In 2008, property prices experienced a record fall, falling by 16%. In 2020, it is expected to fall by 3%. "The forecast is more uncertain than ever," said Hansen Lu of Capital Economics.
However, "the picture today is fundamentally different from 2008. Falling prices for large houses are still unlikely," said Andrew Burrell of the same company.
The impact of coronavirus on the real estate market is bilateral. Firstly, the policy of social distance hit the mechanical sales processes with a brick. Buyers cannot browse the property, people cannot meet to sign documents. Mr. Lu expects that the number of transactions will be reduced by 40% between April and June of this year.
Secondly, the economic impact of the outbreak and measures to reduce its spread mean that the UK economy is shrinking. Capital Economics expects GDP to decline by 15% between April and June compared to the first three months of this year. There is less money.
But both of these factors will have a limited impact on values. Usually only forced sellers will remain in the market during a crisis and they will accept lower prices, said Mr. Lu. There's a difference between that and saying "go and buy because houses are cheaper," he said. There will just be very few deals. Most sellers will not agree to lower prices and will sit idly by.
It is extremely important that the market will be supported by government mortgage lending measures. This will significantly delay the start of forced sales, which means it will continue to support housing prices. But what should buyers and sellers do so far?
Is it worth buying a house now?
If housing prices can still avoid a significant drop, those who buy now will get rid of the pain associated with the fall in the value of their property at the end of the year.
The recent decrease in the Bank of England base rate has also reduced some variable rate mortgages, which will benefit buyers. Lloyds Bank, Halifax, Bank of Scotland and Barclays said they will transfer their savings to customers on variable rate mortgages from April 1.
Chris Sykes, a mortgage broker at Private Finance, said that now might actually be a good time for first-time buyers. This is because interest rates for people who borrow 90% to 95% of their property value are at their lowest level in recent years.
Is it worth selling your house now?
Today, the number of home views has dropped by 75% and is expected to decrease even further, so it will be harder for people to sell their property. Mr. Burrell advised sellers to postpone the sale, if possible. "We don't expect the property market to slow down for more than three months or so before demand recovers, so if you can wait, wait," he said.
Mr. Sykes said there's not much sellers are losing by putting their property on the market anyway. "There's gonna be more people who need to buy and people who need to sell, creating opportunities for both sides." If you find someone who is desperate to buy, they may be willing to pay more because the offer is low. If there is no interest, you can always rent a house from the market," he said.
Isn't this the best time for a re-mortgage?
Interest rates are at a very low level, which means that those with high mortgage rates at the moment can reduce them with re-mortgages.
Some mortgage rates are now below 1%. Natwest, for example, offers for just 0.74%. "Most mortgage rates are now free of early redemption fees," Sykes said.
However, only about 10% of new mortgages are given at variable rates, while the rest are on a fixed basis. Lenders have not reduced interest rates on their fixed transactions after the bank rate has been lowered, and some have even increased them for new customers.
However, some homeowners will prefer the more expensive fixed rate option because of fears that interest rates will recover quickly.