No covid fall in house prices, predicts Zoopla

House prices are unlikely to fall significantly due to the covid-induced recession in the economy, according to an analysis by property portal Zoopla.

Publishing its monthly city house price index, Zoopla said it saw little sign of momentum in the housing market waning, and that prices will end the year 2-3% up, despite the impact of the coronavirus lockdown.

In addition, the firm said the lack of forced sellers, continued prosperity of many buyers, and low house price inflation in recent years meant it was unlikely prices will fall significantly beyond that.

It said the negative economic impacts of the current economic recession were being felt more by younger people in insecure employment who were less likely to be looking to buy homes anyway.

The firm said house prices had risen by 2.5% in the last year, slightly down on the figure in June, with the month-on-month increase dropping to 0.6% from 0.9%.

However, it said that by most measures of the market, including supply and demand for houses, activity remained at or close to five-year highs, and that the average time a house spent on the market had plummeted by 31% since lockdown. Consistent with the idea that lockdown has prompted buyers to look for bigger homes, Zoopla said that the largest four- and five-bed houses had seen the biggest proportionate drop in the amount of time taken to sell.

Richard Donnell, research and insight director at Zoopla, said the strong market was not merely a reflection of pent up demand resulting from the virtual closure of the housing market between March and May. He said: “It also reflects the impact of a once in a lifetime reassessment of the nation’s housing needs in the wake of the 50+ day lockdown.

“Homeowners and renters are reconsidering their housing requirements, characterised by a search for more space and changing expectations for work and commuting patterns.”

Zoopla’s data show that a bigger proportion of housing market activity is being driven by the wealthiest households, which it said went some way to explaining the strength of the housing market at a time of recession and rising unemployment. Donnell said: “With half of all homeowners having no mortgage and a large portion of the remainder having considerable equity in their homes, the constraints of affordability and mortgage availability are not spread equally across buyers and sellers.”

Zoopla’s prediction contrasts with forecasts by estate agent Knight Frank of a 7% fall in prices this year, and by bank Santander of a 6% fall in prices. At the start of the crisis, the Bank of England was predicting a decline in prices of as much as 16%.

While a number of forecasters have been revising their predictions as to the timing of house price falls in the wake of data suggesting a much stronger than expected rebound in the housing market post-lockdown, today’s analysis makes Zoopla one of the first to suggest the market may not see any falls at all.

Just last month Zoopla said it was likely that single digit price falls would happen in the first half of next year.