UK property warning: House price slump not all good news for first-time buyers – expert

Analysts are predicting drops of between three and thirteen percent this year as a result of the economic turmoil created by the pandemic and its aftermath. But experts have warned house hunters previousy priced off the property ladder that cheaper does not always mean more affordable.

In some ways this has created opportunities for first-time buyers

Vadim Toader

Hansen Lu of research firm Capital Economics, which predicts a price drop of three percent in 2020, said: “If there is a significant fall in house prices, something has really gone wrong with banking or with the economy.”

He said an economy in a long-term recession would put many first-time buyers’ jobs and with wages at risk will be harder for them to get lending.

There would also be very few homes available as over-borrowed homeowners get trapped in negative equity.

Mr Lu said: “If you are then in a sweet spot position where you can buy at a discount, it’s more because you are lucky.

“If there are enough of those people, that’s what stops house price falls in the first place.”

Most analysts are predicting short-term drops rather than a housing market crash.

Vadim Toader, chief executive of equity loan lender Proportunity which specialises in first-time buyers, said: “In some ways, this has created opportunities for first-time buyers.

“Some are sniffing some price cuts but I think there’s going to be a bit of a wave of disappointment.”

The Centre for Economics and Business Research has forecast disposable incomes will fall by five percent this year and Mr Toader said such loss to income will be multiplied because it will affect how much buyers can borrow.

But Oliver Knight, residential research associate at Knight Frank, said first-time buyers will still have an advantage because of the stamp duty exemption.

He said: “One of the biggest barriers to moving is already removed.

“The big issue will be stock. When prices fall, sellers clam up.”

Around 373,000 property transactions, with a total value of £82 billion, are now on hold due to coronavirus lockdown measures, according to estimates from Zoopla.

The majority of the sales, which Zoopla said are worth just under £1 billion in estate agency fee income, were agreed between November 2019 and February 2020.

They would have been set to complete between April and June.

Zoopla said the number of sales being agreed is running at a tenth of the levels recorded in early March, with volumes similar to what would be expected around Christmas time in late December.

The Government has said that, where a property is currently occupied, home-movers should do all they can to amicably agree on alternative dates to move.

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People can still continue to move in limited circumstances, such as in cases where the property is vacant.

Zoopla said the rate of sales falling through peaked on March 23 – the day stricter social distancing measures were imposed.

Demand from would-be buyers fell by 70 percent between the start of March and the week ending March 29.

The fall in demand bottomed out in early April and has since seen a slow improvement.

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