UK house prices have fallen at the fastest rate since 2009 amid the coronavirus pandemic, Nationwide Building Society has revealed.
The monthly drop of 1.7% in May was the biggest since the financial crisis, meaning the average house price in the UK is now £218,902, compared to £222,915 in April.
This momentous drop followed a 0.9% increase in April, when annual growth was recorded at 3.7%. Now, the annual growth rate is 1.8%, the slowest since December.
Experts have predicted that house prices could fall anywhere between 3% and 30% this year because of Covid-19, after lockdown brought the market to an abrupt halt.
But these new figures from the Nationwide house price index indicate the size of the challenges facing the housing market and the UK economy.
Ross Counsell, director at Good Move, commented on the findings: “These numbers are largely down to the reduction in market activity due to social distancing measures, and is a real tell-tale sign for the future of home buying.”
Could House Prices Bounce Back?
Robert Gardner, Nationwide’s chief economist, said that the economy is in the midst of a shock, and it could take time for this to pass and for house prices to recover.
“The raft of government policies adopted to support the economy, including to protect businesses and jobs, to support people’s incomes and keep borrowing costs down should set the stage for a rebound once the shock passes and help limit long-term damage to the economy.”
Counsell added that house prices could bounce back, but the housing market may need to adapt in order to respond to changing customer behaviour in the wake of the coronavirus pandemic.
“The bounce back in the housing market is reliant on how the wider economy performs, however, the bigger challenge is how consumer behaviour has changed and how sellers need to adapt to continue to sell their properties. For example, they will begin to adjust their expectations on the price they will achieve and may be more inclined to accept a lower offer.
“We expect to see house prices bounce back fairly soon, but flats and other similar dwellings may take a much longer time to recover.”
Is Consumer Behaviour Changing?
Nationwide’s findings also showed that potential buyers are now planning to wait six months on average before entering the housing market, and that 12% had put off moving homes because of the lockdown.
Moreover, housing preferences could be impacted. One in 12 households have invested in new home offices during lockdown, and buyers might be applying more importance on aspects such as outdoor space, which could impact how properties sell.
Gardner said: “Behavioural changes and social distancing are likely to impact the flow of housing transactions for some time. Most viewed the current situation as a temporary pause in the market, with would-be buyers now planning to wait six months on average before looking to enter the market.
“22% of people said they had changed their mind as to what constituted the most important aspects of a home and are considering improving their home as a result of Covid-19.”