More than 520,000 UK home sales will be abandoned this year, after the government ordered a temporary freeze on the housing market last month due to the coronavirus outbreak, new research shows.
Property consultancy Knight Frank said the 38% drop in the number of house sales in 2020 would have a ripple effect across the property industry, hitting retailers, removal companies and even government coffers.
Assuming physical distancing rules stay in place throughout May but are gradually lifted in June, the property market downturn will result in 350,000 fewer mortgage approvals in England and Wales including 150,000 fewer mortgages for first-time buyers, Knight Frank added.
Homeowners are also expected to spend £7.9bn less on DIY and renovations this year, while removals companies will lose out on around £395m. Meanwhile, the Treasury is expected to lose out on around £1.6bn in VAT, on top of significant losses in personal and business tax revenues.
While the exchequer is also expected to forgo around £4.4bn in stamp duty, Knight Frank is calling for a stamp-duty holiday as part of efforts to jump-start the property industry once the lockdown measures are lifted. The property consultancy said those measures should also including extending the help-to-buy programme and relaxing planning rules.
Tom Bill, head of London residential research at Knight Frank, said: “Moving house has a clear multiplier effect for the economy. Different-sized businesses in all areas of the economy feel these benefits, which is something the government will take into account when drawing up its post-lockdown stimulus plan.”
Property website Rightmove said it had already recorded a 40% fall in the number of homes listed for sales since 26 March, when the government effectively froze the housing market by telling buyers and sellers to delay moving home if possible and halt viewings until restrictions are lifted.
Rightmoves figures suggest that although would-be sellers are still allowed to deal with estate agents, many have put plans on hold. The website, which covers around 95% of the market, said that there were 65,531 new listings between 8 March and 11 April, a period straddling the date that the lockdown came into effect.
In contrast, between 10 March and 6 April 2019 a total of 112,570 homes for sale were added to the website. Rightmove said this marked an “abrupt turnaround from the best start to a year since 2016”, and that before lockdown sales had been 11% up on last years figures.
On Friday, London-based estate agency Foxtons said it had furloughed 750 employees as part ofmeasures to protect the business against the slump.It said it had modelled “a reasonable worst-case scenario period of lockdown restrictions in London until the end of August 2020”, which result in revenues 78% lower than in the same period last year.
But sellers do not appear to have withdrawn homes from the market in any great number, with available stock down by just 2.6%.Rightmove also said the average asking price of new homes coming onto the market had fallen by just 0.2% to £311,950, but warned that comparisons were not “meaningful” in the current situation.
Miles Shipside, a director at Rightmove, said: “We think it will take several months or more for the market to find its feet in this new unsteady world.
“During this slow-motion period we do not expect significant price falls, as home sellers will not be prepared to cut their prices while it is still not clear how the general public, businesses, financial markets, and the government are going to handle the transition to whatever turns out to be the new normal.”
Estate agents have switched to online viewings with some sellers providing their own tours of their properties. Ben Hudson, managing director of Hudson Moody estate agents in York, said his company had adapted its business.
“Prior to the stay-at-home period we put together videos on many of our properties and invited our clients to produce their own virtual viewings which has had a really positive and enthusiastic response,” he said.
“The vast majority of ongoing sales want to proceed as soon as possible after the lockdown”.
Housing market commentator Henry Pryor said it was “worth remembering that there is no direct cost to putting your property on the market and estate agents will always want to list homes even if people cant view them”.
But while half of homes listed usually find a buyer eventually, Pryor said the ban on physical viewings and the lack of surveying means that “this month there may be less than 1% sold.”