Britain’s property market and economy could enjoy a ‘strong rebound’ once the coronavirus crisis ceases, Nationwide suggested.
The latest Nationwide house price index painted a picture of a property market before coronavirus hit, with the average cost of a home up 3 per cent annually as home values rose at the fastest pace since January 2018.
For the time being, however, the housing market has ground to a halt. Lenders, including Britain’s biggest building society Nationwide, have pulled swathes of their mortgage range, estate agents are closed and property viewings and moves are being cancelled or postponed.
Nationwide’s chief economist Robert Gardner said the medium-term outlook for house prices was ‘highly uncertain’ but that government rescue packages would lessen the impact.
An uptick in house prices at the start of the year on the Nationwide house price index continued into March, before the UK went on coronavirus lockdown
Mr Gardner said: ‘The raft of policies adopted to support the economy, including to protect businesses and jobs, to support peoples’ incomes and keep borrowing costs down, should set the stage for a strong rebound once the shock passes, and help limit long-term damage to the economy.
‘These same measures should also help ensure the impact on the housing market will ultimately be much less than would normally be associated with an economic shock of this magnitude.’
The index showed the average house price rising almost £3,500 in March to £219,583, but is based on Nationwide’s own mortgage approvals and mainly covers the period before Britain went into lockdown on 24 March.
‘It is important to note that, while we use a full month’s worth of data to generate the index, the cut-off point is slightly before the end of the month,’ said Robert Gardner, Nationwide’s chief economist.
He added: ‘This means that developments following the UK government’s lockdown will not be reflected in these figures.’
Before the pandemic gripped the nation, property prices had been ‘steadily gathering momentum’, Mr Gardner said.
Cheap mortgage deals, Help to Buy schemes, a slightly more stable political backdrop and a fairly strong labour market had all played their part in the market’s recovery and the so-called Boris Bounce in the New Year.
Now, however, with transactions largely at a standstill, it will be difficult to gauge how house prices are shifting over the next few months.
On Wednesday, Nationwide tightened measures on mortgage applications and will no longer takes bonuses and overtime pay into account.
The lender also pulled its mortgage offering for low-deposit borrowers earlier this week.
The property market had picked up in both Northern and Southern England, Nationwide said
Other banks have also done a dramatic U-turn from the position they were in a month ago, when a fierce mortgage market price battle was being waged.
Lloyds Banking Group, which owns includes Halifax and Scottish Widows and is the country’s biggest lender, has capped lending at 60 per cent of loan to value.
Barclays has also put a cap on how many mortgage applications it will accept from brokers for the time being, and along with other lenders, is temporarily limiting high loan to value mortgages.
Ratio matters: The UK house price to earnings ratio since 1990
How house prices were rising
In the first quarter of this year, Wales saw the strongest property price growth out of every region in the UK, and in the last year the area has seen prices swell by 6.4 per cent, Nationwide’s house price index for March shows.
On an annual basis in England, house prices increased by 1.9 per cent, while in Scotland and Northern Ireland they rose by 0.8 and 0.7 per cent respectively.
How house prices were rising across the UK before the coronavirus outbreak hit
‘In England, all regions except the North saw modest price growth of between 0% and 5 per cent – in the North prices were down 0.3 per cent compared with Q1 2019’, Nationwide said.
House prices in London rose by 1 per cent year-on-year in the first quarter, following 10 consecutive quarters of falls. London remains the most expensive place in the country to buy a property.
Looking ahead: Britain’s property market could enjoy a ‘strong rebound’ once the coronavirus crisis ceases, an economist has suggested
Howard Archer, chief economist at the EY Item Club, said: ‘The expectation has to be that house prices will come under significant downward pressure from a sharp rise in unemployment and people’s incomes being hit (despite the Government’s measures) as well as sharply lower consumer confidence and increased caution.
‘Once restrictions start to be lifted on people’s movements, housing market activity should progressively pick up.
‘Even so, given the impact on the economy, the anticipated rise in unemployment and the hit to many people’s incomes, the housing market looks unlikely to return to the levels seen at the start of 2020 for some time.’
Last week, property listing site Zoopla reported that demand for viewing houses was down 40 per cent in a week and looked set to dwindle further.
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