What will happen to house prices in South Wales when the Coronavirus lockdown is lifted?

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Home 5 Blog 5 What will happen to house prices in South Wales when the Coronavirus lockdown is lifted?

What will happen to house prices in South Wales when the Coronavirus lockdown is lifted?

The English housing market has been open since the 13th May 2020. As house price data trickles through, we’re getting a better idea of what might be in store for us in South Wales.

Of course, in Wales, we’ve yet to see any major movement on Covid-19 restrictions – on Friday 19th June, Mark Drakeford announced that some house viewings can resume on vacant properties, but those who are still living in their home will have to wait!

TLDR; Sellers might achieve better sold prices if they find a buyer soon after lockdown measures are lifted, whereas buyers may benefit from waiting until the initial post lockdown rush has calmed down for the best deals.

What’s happening over the border?

In England, the short term property market outlook appears to be surprisingly positive. Rightmove reports that there has been a ‘strong initial bounce-back in all metrics’ since the coronavirus shutdown was lifted. They estimate that 175,000 ‘missing’ sellers could be waiting to put their homes on the market after being prevented from doing so during lockdown – a record number of valuation requests are now being sent to agents.

Adjusted for population, this means 10,000 people in Wales could be waiting to market their homes.

Rightmove say that the number of properties coming to market is an accurate early indicator of demand and their director, Miles Shipside, has reported a ‘boom in traffic’ on their website – further, he says there are no signs of panic selling or even a price dip. But will all of this interest mean higher asking prices?

Rightmove analysed over 7,000 newly agreed (not completed) sales in the period between 13th May and 4th June and found that on average, buyers were accepting offers of 97.7% of asking price. To put this in perspective, the figures for completed purchases in February 2020 were 96.6%. These figures are of course subject to regional variations and we’re yet to see what will happen in Wales. Shipside observes that there is a ‘modest degree of upwards price pressure showing that those buyers hoping to negotiate hard may find their offer rejected’.

What does this mean for Wales?

There is no doubt that there has been an initial flood of activity in the English housing market, but this story will not necessarily be repeated in Wales.

Nevertheless – we can only go off the data we have. This table shows that house prices have risen in the regions closest to Wales since lockdown began in March.

HOUSE PRICE REGIONAL TRENDSAvg price Jun ’20Change since MarchAnnual Change
West Midlands (England) incl Gloucester£238,123+2.1%+3%
South West of England incl Bristol£321,996+2.8%+3.4%
Rightmove House Price Index 15th June 2020

Here in Wales, house prices were on the rise before the pandemic crisis. In Principality’s 2020 House Price Index Wales Q1 2020 Report, Tom Denman, their Chief Financial Officer hoped that the various economic stimuli made available by the government in Wales following the COIVID 19 outbreak ‘will allow the housing market to come out the other side and operate as normal’.

In Newport, as of February 2020, compared to the same time last year, house prices were down 1.1% – likely adjusting after the ‘Bristol Boom’.

In Monmouthshire, on the other hand, in February 2020, prices were 5.8% up on the year before. Likewise, Cardiff prices were up 5.3%.

Despite the slightly rosy short term picture presented by these figures, it’s clear that the medium to long term picture is a little less certain, in particular:

  • Mortgage lenders are clearly concerned with stability of house prices. There are currently fewer lenders than we’ve ever seen offering 90% loan-to-value mortgages – making life much more difficult for first time buyers with small deposits.
  • COVID-19 has had a huge impacts on the size and growth of the UK economy. It’s also possible that a no deal Brexit could further negatively impact the economy and reduce average earnings (after inflation) across Wales.
  • The governments coronavirus economic support packages will start to tail off towards the end of this year at which point many businesses may struggle to stay open – potentially driving house prices down.

The Royal Institute of Chartered Surveyors anticipate a fall in demand over the coming months, and have even called for the government to consider Stamp Duty holidays!

It is likely that the finances of potential homebuyers will be under strain, and the burden of stamp duty could put buyers off. For those who can afford to move they may lack confidence in the market, adding to the slow down.

Huw Edgar, RICS Head of Government Relations

It’s certainly true that economic crises can impact house prices dramatically – between June 2007 and December 2008 – after the global financial crisis – house prices fell by 16%. We hope that the long term impacts of COVID-19 will be felt less in the housing market.

Saville’s have estimated that house prices will fall by 7.5% in Wales and across the UK in 2020. Only really making a full recovery as we approach 2022.

SUMMARY

If Wales follows England, we will likely only see only modest movements in house prices in the months following lockdown as pent up demand offsets any fall in consumer confidence. Sellers who are quick to market could achieve sale prices very close to what they would have achieved in February.

However, as time goes on, and the economic impacts of COVID-19 become clearer, we could see more widespread falls in house prices – perhaps in the region of 7.5% before they begin to recover in 2021. Buyers might get better deals after the initial rush subsides.

A survey of chartered surveyors by the RICS demonstrates that house prices and sales are expected to fall sharply in the coming three months. Positively, they also anticipate prices and demand will have recovered within a further six to nine months.

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