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How will coronavirus affect the property market?

Find out what impact COVID-19 could have on the property market and what it could mean for home buyers and sellers.
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As things change rapidly during the coronavirus (COVID-19) crisis, this guide will be updated regularly to reflect changes in rules and regulations.

The coronavirus (COVID-19) pandemic has impacted the UK economy in several ways. This is especially true for the property market which was been hit hard due to the lockdown measures implemented by the government.

What’s going on in the property market?

Back in May, the government re-opened the property market allowing sellers to conduct in-person viewings and buyers to proceed with their moving plans.

According to Zoopla, almost 400,000 home sales worth a total of £82bn had been put on hold due to the lockdown.

How have house prices been affected?

House prices saw a four month consecutive decline since March. At the same time the number of homes listed on sale has dropped considerably.

However, as things have re-opened in June, the demand for homes has seen a sharp increase approaching a return to near pre-lockdown levels. Whether the lack in supply and increase in demand translates to higher house prices remains to be seen.

It's likely that house prices may fluctuate over the next few months as the property market adjusts from the shock of the lockdown and reacts to the ongoing economic realities.

How will the stamp duty holiday affect the property market?

On 8 July Chancellor Rishi Sunak announced a temporary cut in stamp duty in a bid to give the housing market a boost and to get the overall economy running again.

The change increased the mimimim stamp duty threshold from £125,000 to £500,000 in England and Northern Ireland.

This means that the first £500,000 of the purchase price of your home will be exempt from stamp duty.

The hope is that with the amount of savings possible because of this change - about £4,5000 on average – more people will be motivated to buy homes now, rather than wait till next year.

Find out more about what the new stamp duty holiday means for you.

But a stamp duty holiday is isn't merely meant to help people buy homes. Housing is a fundamental part of the economy. When people buy homes, it has a network affect on the economy. Most people will switch utilities, redecorate or make home improvements.

All of these help the retail sector, which has taken a real hit during the lockdown.

Can you get a good mortgage deal in the current property market?

There's no doubt the number of mortgages available has shrunk significantly since lockdown began. Some estimates say that the number has almost halved.

There are several reasons for this:

  • The government's three-month mortgage payment holiday has forced lenders to divert their resources to focus on helping existing customers.

  • The drastic reduction to the base rate from 0.75% down to 0.10% resulted in banks and lenders withdrawing from offering tracker mortgages.

  • Lockdown measures meant that lenders couldn't conduct in-person mortgage valuations.

That said, this doesn't mean you can't get a good mortgage deal in this climate. This is especially true if you have a sizeable deposit save up.

If the LTV for your mortgage is 80% or lower, you have a much better chance at getting a good deal. However, be aware that the deal you're offered also depends on other affordability criteria such as income and credit history.

What about first time buyers?

Most mortgage providers had withdrawn 90% and 95% LTV mortgage deal as a result of the pandemic. This affected first time buyers the most who typically benefit from availability of high LTV mortgages.

Borrowers with smaller deposits are considered to be a higher risk of defaulting or falling into negative equity because of a drop in house prices.

But things are looking up, as on 14 July the UK's second largest mortgage provider, Nationwide, announced a return to offering 90% mortgages. This will be a welcome sign for first time buyers and may help other providers follow suit.

Is Help to Buy a good option?

The government’s Help to Buy scheme might be a good option if you're open to considering a new build property.

The Help to Buy scheme gives buyers a 20% equity loan in addition to the 5% deposit you put forward. This way you can qualify for a 75% LTV mortgage and are thus more likely to be offered a mortgage.

You can read more about how the Help to Buy scheme works in our guide.

What other factors are will influence the property market in the future?

It's difficult to predict how the property market will react going forward given the uncertainty at this time. With the furlough scheme coming to an end in October, it's possible that unemployment will rise as more redundancies take place.

There's no denying that this will affect the wider economy and possibly decrease demand for housing. The government has already implemented some strong measures to keep the economy afloat so far, and it won't be surprising if further measures are needed in the future.

If you're a first time buyer or looking to move house or remortgage, we can help you find the best mortgage deal to suit your needs.

About Salman Haqqi

Salman is our personal finance editor with over 10 years’ experience as a journalist. He has previously written for Finder and regularly provides his expert view on financial and consumer spending issues for local and national press.

View Salman Haqqi's full biography here or visit the money.co.uk press centre for our latest news.