Image of a desk set up for working from home.

During the past weeks and months our homes and houses, of all kinds, have become our gyms, places of work, recording studios and personal pubs. Many people are spending their entire time at home, save for a few moments of exercise outside or the local food shop.

People are now looking for and finding the joys of life in the small things, huge numbers have taken up hobbies such as music and yoga, and rooms in their houses are being rearranged to accommodate.

This has raised our national respect for house and home but how will Covid-19 affect local house prices?

Lockdown and release

The government urged people to delay moving house on the 27th March 2020 as the coronavirus spread. This had the effect of essentially freezing the property market and local sales.

This was soon followed with reports a few days later of pauses on new mortgages from lenders such as Nationwide, only offering loans of 75% LTV or less. Then, in April, we saw reports of estate agents struggling, with Foxtons cutting salaries by 20% for those over £40k and furloughing 750 employees.

The housing market was becoming deserted. Zoopla released analysis which showed rental demand was down 57% during the last two weeks of March. We have since seen the impact on sales here at House Price Guru with an unprecedented fall in the volumes of sales in England and Wales in March 2020, which were just 12% of the volume of sales seen in March 2019.

The housing market is a pillar of the UK’s economy and freezing billions of pounds worth of local property sales is going to have an effect. The government therefore issued new guidance to get the market moving again, in England at least, and from the 13th May house moves and viewings were able to resume, estate agents able to open and encouragement was given to developers to continue house building.

The lockdown is likely to have created the largest economic contraction seen in memory. But this is not like the last one, this is a ‘freeze’ driven by our own law and there are many positive views of how the market will rebound and recover once the freeze is lifted. After all, the underlying economy was strong, and we had record employment levels before the crisis hit.

However, it seems likely that there must be some rebalancing to come. It is not necessarily obvious how much variation there will be in local house prices after lockdown because although demand for homes has been hammered, so has the supply. Will people really want to move to a bigger home when salaries are less certain now than they were before? With 8 million people claiming £11.1 billion through the governments furlough scheme as of the 17th May, what are the chances that they will all be able to return to a job that provides a stable income?

Perhaps then, with a less certain economic future and more time spent at home for the foreseeable future our focus will change to improving our existing residences. With extensions, remodels, and other upgrades perhaps now further up our personal agendas.

Local house prices may well take a hit from coronavirus, particularly in the short term – in line with a weaker economy – but the picture is not yet clear on how big this hit will be, with views ranging from a 0% to 15% decline. But perhaps this is a good opportunity to smooth the process of buying a property, which can take months and create a lot of uncertainty for both buyers and sellers, this surely would let the brakes off the market.