Nationwide’s House Price Index for June 2020 showed a year-on-year growth rate of -0.1%, the first negative rate since 2012.
Month-on-month, house prices dropped 1.4% in June, following a 1.7% reduction in May.
While seeing the first negative growth rate in eight years might cause concern for many, Lucy Pendleton, property expert at James Pendleton, pointed out that this is in fact a relatively positive picture compared to what might have been expected.
Pendleton said: “Prices are down by a whisker annually, but what is remarkable is how soft a landing the market has had given the scale of the disaster that has unfolded in the past few months.
“Nationwide’s reading of the situation is totally in line with recent indications that the prices being achieved on the doorstep have slipped to 2% or 3% below asking prices on average.
“June was the first full month of trading since the property market came back to life post-lockdown and these sellers will be those highly motivated to move through necessity.
“That pool of vendors will shrink rapidly and that could put a floor under prices.
“The public are repeatedly hearing that GDP has collapsed and we face a worse recession than the global financial crisis, but that soundtrack isn’t translating into a house price correction at the moment.
However, Pendleton added that there may be more difficult times ahead: “That kind of resilience would normally be seen as a sign of strength and confidence, but we’re going to have to wait for the furlough scheme to end to find out what this market is really made of.”
Jamie Johnson, CEO of FJP Investment, agreed that the housing market is not yet out of the woods.
He said: “While pent-up demand has been flooding the market since lockdown measures were first eased, this has not yet had the positive impact on house prices the industry was hoping for.
“The bigger question is when we are likely to see the beginning of the post-pandemic recovery – how much pent-up demand is there for UK property? Are buyers and sellers confident COVID-19 has been effectively resolved?
“While it is too early to tell at present, we need to be realistic.
“A second outbreak of coronavirus cases and reintroduction of lockdown measures is a distinct possibility and could result in a second retreat of buyers and sellers from the market.
“The market is clearly waiting for further assurances that COVID-19 has passed before making a fully-fledged return.
“Based on recent events, this might not be as early as initially anticipated.”
Paresh Raja, CEO of Market Financial Solutions pointed out that the dramatic reduction in available products over the course of the lockdown has taken its toll, and is yet to return to normal levels.
He said: “At the moment, prospective buyers are still struggling to access loans needed to complete on a transaction, be it due to stringent lending criteria or a lack of suitable products available.
“Ultimately, this is undermining buyer confidence and is no doubt a contributing factor for today’s index, which shows an annual and monthly drop in house price growth.
“It is critical over the coming months that buyer and sellers once again have access to the full range of loan products needed to complete on a transaction.
“Part of the responsibility lies with lenders who must show the flexibility and willingness to adapt to needs of the market.”
A bounce back in house prices is on the horizon, fuelled in large part by the buy-to-let (BTL) market, but is unlikely to happen instantly, added Neil Cobbold, chief sales officer at PayProp.
Cobbold said: “Demand for homes to buy and rent has bounced back impressively over the last seven weeks, but it will take some time for transaction volumes to return to normal.
“House price growth is therefore likely to remain suppressed in the coming months.
“Many buy-to-let investors and landlords will be monitoring the market closely at the moment, looking for opportunities to expand their portfolios – especially if market conditions scupper continued house price recovery and growth.
“The economic impact of COVID-19 could mean that more people have to rent for longer as they find it more difficult to save for a deposit to buy a home.
“This will be frustrating for prospective first-time buyers and housebuilders, but will provide landlords with confidence that rental demand will remain stable for the foreseeable future.
“Meanwhile, the gradual scaling back of the furlough scheme could present further financial issues for prospective buyers, mortgage holders, private tenants and their landlords.
“As the market enters a traditionally busy autumn period over the next few months, the multiple impacts of the pandemic on housing transactions and property prices will continue to become clearer.”
Tomer Aboody, director of MT Finance, highlighted that there were still some pockets of positivity within the figures, particularly in London.
Aboody said: “With property market coming to virtually a complete halt during lockdown, it’s not surprising to see the negative impact this had on the market, with fewer purchasers and mortgages being approved.
“The backdrop to this, however, is that London property prices are still well above 2007’s peak, which again shows the stability in a prime location.
“This fall is likely to be more of a blip – prices will gain traction again and the market will hopefully bounce back before too long, along with the rest of the country.”