Do you think Covid-19 will cause a crash in the housing market?

[Toddlertown]

We were viewing properties to buy (first time buyers) prior to this out break. Obviously this is now on hold. There are a few articles I have seen suggesting house prices are going to fall drastically due to a recession after all this is over. Do you think that’s true? Should we hold off?

It has already started.

Yes. Firstly, because there is the potential for the housing market to be flooded by the homes of those who have lost their lives. Secondly, and probably this will have a bigger impact, because everyone will be worried that there will be a resurgence in cases & we'll have to go into another period of lockdown. Therefore, there is almost certainly going to be another recession, if not (possibly) a depression following this.

I don't even want to think about whether the first reason could be a primary factor. It depends how many lose their lives. Hideous thought.

No, I don’t think so. This isn’t a true recession. People want to go out spending, we’re just not allowed to at the moment.

@MayTheGodsBeEverInYourFavour the estimates have been revised down to about 5,500, which is quite amazing really.

Hmmm depends how long the crisis goes on for. People will only try to sell if they need to, eg divorce run out of cash. It’s hard because we are looking to buy but yet don’t want to wish for the reasons that will drive the crash etc

No the government won’t let the house market crash. I imagine help to buy schemes may extend to older properties too. As a pp mentioned this isn’t a true recession - the people who would have bought houses (ie higher than 30-40k joint salary) are also the ones most likely to be working for companies that allow work from home or have been furloughed until business as usual is resumed.

Quite a few of friends are parked at home on 80% of their salary and not able to spend anything. Not bloody self-employed me though. But still. It’s not a financial disaster for everyone.

Yes, especially if the lockdown ends up being months. As awful as it sounds not being able to work will have a negative impact on a lot of people's incomes and they'll likely have to downsize. I also expect once the lockdowns are lifted a lot of people will be selling houses due to relationship breakdowns. Mortgage interests rates are also rising towards the rates they were in 2011 so lots of people will be forced to sell up as they can no longer afford the monthly payments due to the steep rise in interest rates. I imagine plenty who bought their first home through help to buy will be stung by negative equity for a good few years.

Nope. It hasnt impacted on the supply and demand issue that has faced this country for decades... Its basically on pause... Now if lots of people die and there are therefore empty homes to sell maybe an effect locally but that'll be it.

Im not sure there will be a crash but I think there will be a significant slowing of the market and in areas like London, I think average prices will go down.

I think sadly lots of people will lose jobs out of this - businesses will fail, despite help from the government etc. Think of retail, travel etc. I also think there will be those that have managed to keep jobs but on lower pay who may be in financial difficulty after this (eg those on 80% pay or taking unpaid leave etc). Many people live month to month and can’t take a hit like this.

The market was only just about picking up over the last three months, after all the uncertainty of brexit. I certainly wouldn’t be looking immediately after restrictions are lifted, I’d keep a very close eye on things.

Ours was on the market before the lockdown and to be honest we were still getting a surprising amount of interest right up until lockdown was announced. If the estate agent had their way we’d still be having viewings! We’ve opted to wait it out and commence viewings as soon as we’re able to, but we’re hopeful it won’t have too much of an impact on the final price.

I think there will be a crash. The effect on incomes will mean people have less money to spend on houses, and will be nervous of doing so, or even completely unable to do so as they will have used up any savings just to live on or even got into debt, which will have to be repaid before they can borrow to buy a house.

Disclaimer - I don't have a crystal ball!

Lots of mortgage products have been pulled in the last week and several big lenders are only offering rates for 40+% deposit/equity at the moment. That might be a temporary response to the demand for mortgage holidays, but people may well find it significantly harder to borrow as much, or at all, for a while.

This surely depends on where you are to a certain degree no?
The big cities such as London /Edinburgh are always going to be desirable, at best in the big cities it will be a very short lived "crash" but using that word does seem a bit dramatic
Other parts of the country may suffer more

My estimate is that prices will fall significantly though I'm usually wrong about things.

You mentioned a crash - I don't know if people consider a crash to be any fall or is a crash a significant fall beyond say 10%?).

As with previous recessions/depressions, the effects are slightly complicated as homeowners generally pull houses from the market rather than crystallise a loss if they don't have to move, just want to but forced sellers (deaths, relocations, divorces, unable to pay) are generally enough to cause the overall market to fall overall statistically (see ONS, Nationwide, Halifax surveys).

If you want to inform yourself, look at property prices historically (you may see falls probably around 1987-1992-ish, around 2008, possibly around 2019 in London? depending on the regional market you live in) to see when prices fell in your market and what was happening in the economy at the time.

Good luck.

@UselessTrees where are you getting those facts from. Quick look on money supermarket and there are 40 pages off products with 90% so your post seems a bit far off

It is correct. I am a conveyancer and I have had clients have their mortgage offers pulled this week. Anything 85% upwards loan to value. Lenders are expecting negative equity.

I work for banks and this just isn’t true

I think the entire economy is going to be toast for a long time - at the very least 5 years, I'd guess, more probably 10.

You know how, if something happened beyond your control and you ended up having to take out an unbudgeted-for (and likely unaffordable) £100K loan to get yourself back to where you were before? Well, that's the whole country now.

Even when things are back to normal, millions of those who have managed to struggle through relatively unscathed will, having seen how quickly and easily things can plummet, will be terrified of over-committing themselves in future. I think people will have it in their heads that, even if they could get compensated for losing their earnings, it will only be for a maximum of 80% if something similar happened again, so they will need to plan everything around having 80% of their (take-home) salary available to spend and not living up to or near 100% of it.

I wonder if there will be even less rental options around also ?

not sure about a crash, but prices in my part of London were very toppy & have stagnated for yrs. Remember house prices were propped up after the financial crash by slashing interest rates, help to buy etc. January house prices were not good before this crisis & I think many areas have already hit a ceiling. A lot of the market has been driven by equity but the rung is so high now that the days of paying 400 for a flat & selling it for 600k a few yrs later are over imo.
Remote working may lead to less concentrations in cities & some people may have a change of perspective after this. A lot of younger people I know already remote work & even those with good jobs don't want to pay through the nose & prize lifestyle over just money.

The housing market requires people at the bottom to continue the cycle. Think of what the younger generations are already facing, higher education, higher living costs, wage stagnation, state pension pushed out further & further, an NHS unlikely to exist in its current form when they ate older. Plus increased tax to pay for this. There are less of them too as people are having less children & later.

There won't be a crash. The world's governments have thrown so much stimulus at this virus, that the moment it is contained, shares and houses will sky rocket.

Saying that, I wouldn't want to be in the position where I had to sell a house right now. You may be able to pick up a bargain if you can find one right now.

But I wouldn't leave it too long, as I would expect exponential growth in a year or two.

we need to pay for that stimulus though

Yes it probably will.