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Housing market will take nine months to recover

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Written by: Owain Thomas
14/05/2020
The Royal Institution of Chartered Surveyors' (RICS) latest residential housing market survey suggests it will take at least nine months for property sales to fully recover to their pre-coronavirus crisis levels.

It added it is likely house prices will fall at least four per cent in the next few months, with a full recovery taking almost a year.

Crucially, the survey of valuers was conducted before news of the housing market being allowed to re-open and the subsequent early surge in enquiries.

As a result responses, which are measured on a scale of 100 per cent to -100 per cent, remained highly negative reflecting the situation throughout the April lockdown.

After three months of house price growth to start the year, a net balance of RICS members believed prices had fallen in April.

A third of participants believe when the market reopens, prices could be left up to four per cent lower, while more than 40 per cent take the view that prices could fall by more than four per cent.

RICS added that feedback suggested a recovery in prices could take a little while longer than sales levels, with the average prediction being for prices to recover in eleven months.

Respondents also believed the government should be incentivising the market with 62 per cent saying a stamp duty holiday would see sales recover quicker.

They argued a stamp duty holiday would lift sales and leave prices relatively unchanged.

Last month saw 80 per cent of respondents reporting buyers and sellers pulling out of transactions with the sales balance falling to -92 per cent from -68 per cent in March.

RICS added that unsurprisingly, there were continued significant declines in new buyer enquiries and new instructions over the course of the month, with the instructions net balance the weakest since it began in April 1999.

RICS chief economist, Simon Rubinsohn, said: “Not surprisingly, the latest survey shows that housing activity indicators collapsed in April reflecting the impact of the lockdown.

“Looking further out, there is a little more optimism but the numbers still suggest that it will be a struggle to get confidence back to where it was as recently as February.

“Moreover, whether this can be realised will largely depend on how the pandemic pans out and what this means for the macroeconomic environment.”

He added that to ensure the housing market can begin to operate in a more functional way and that developers have the confidence to continue building, further specific interventions from government were likely to be necessary.

Former RICS residential chairman Jeremy Leaf added: “Near-term expectations show that we shouldn’t get carried away by this sudden release of pent-up demand.

“Many bigger hurdles remain for homebuyers and sellers, not least in arranging visits safely and securely, as well as ensuring that previous as well as new lending arrangements are in place on the same or similar terms.”

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