11:21 AM, 2nd June 2020, About A year ago
The Nationwide has just released its House Price index for May showing the effects the coronavirus lockdown is beginning to have on the housing market.
Robert Gardner, Nationwide’s Chief Economist, said: “UK house prices fell by 1.7% over the month in May, after taking account of seasonal effects and this is the largest monthly fall since February 2009. As a result, the annual rate of house price growth slowed to 1.8%, from 3.7% in April.
“In the opening months of 2020, before the pandemic struck the UK, the housing market had been steadily gathering momentum. Activity levels and price growth were edging up thanks to continued robust labour market conditions,low borrowing costs and a more stable political backdrop following the general election, but housing market activity has slowed sharply as a result of the measures implemented to control the spread of the virus. Indeed, data from HMRC showed that residential property transactions were down 53% in April compared with the same month in 2019.
“Mortgage activity has also declined sharply. Nevertheless, our ability to generate the house price index has not been impacted to date, as sample sizes have remained sufficiently large (and representative) to generate robust results.
“Low transaction levels may still make gauging price trends difficult in the coming months especially for regional indices, which by their nature have lower sample sizes.”
Where next for the housing market?
“The medium-term outlook for the housing market remains highly uncertain, where much will depend on the performance of the wider economy.
“We have already seen a sharp economic contraction as a result of the necessary measures adopted to suppress the spread of the virus. Indeed, the 5.9% decline in UK economic activity recorded in March was only a little less than the decline recorded over the entire financial crisis.
“However,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 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 less than would normally be associated with an economic shock of this magnitude.”
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