Will House Prices Fall In 2020?
Will house prices fall during 2020?
The burning question on many buyers’ and sellers’ lips is undoubtedly,”Will property prices fall due to the Coronavirus outbreak?”
Many people say that there is no safer investment than putting your money in bricks and mortar, however as with any investment there is no certainty that it will provide a guaranteed return. There are many factors which will affect prices which we will look at below.
Supply and Demand
Supply and demand are key factors for prices of anything that is being sold. People will always need somewhere to live and situations change, with people wanting to upsize due to expanding families, or indeed people looking to downsize due to children leaving home. These facts are indeed true, however each of these people will be selling one property and buying one property, therefore neither adding, nor subtracting from the overall stock levels. First time buyers and investors are the key to an increase in demand, with new people looking to get on the ladder all the time. First time buyers however are very cautious and with economic uncertainty and banks tightening lending criteria, many first time buyers may look to wait to let the dust settle and stay in rented accommodation or at home with their parents. Investors are always on the lookout for “good deals” which they normally compare with current prices in the area they are looking. This means that if there is a drop in prices then an attractively priced property in today’s market will not be so attractive after the market falls, meaning that acting now could be the key. Property landlords in the residential and commercial property sector will be experiencing difficult times at present with tenants not paying rent, paying part rent, or in both the commercial property sector and in private rented properties becoming empty. This combined with stricter tax laws for landlords will force their hand in to looking to sell properties which will of course increase supply to the market. With supply increasing this will mean that people will need to price their properties accordingly and be competitive, therefore driving prices down.
As has been proven in history, house prices are generally linked to how the economy is performing, with the most recent example being in 2007, with the banks’ collapse and world financial crisis being a catalyst for the sudden drop in house prices. The Coronavirus outbreak has had a big impact on the economy so far with The Guardian reporting that unemployment rates are set to double to 8% in the next few months. With businesses struggling due to the outbreak and closures, those lucky enough to still be in work may be on reduced hours, meaning less take home pay. The government have put measures in place to try to help the economy including loans and grants for businesses and the furlough scheme to help employers keep people in jobs. The Office for Budget Responsibility have estimated that these packages will cost the government over £100bn this year. This money will need to be recouped, this will normally be additional income from the taxpayer, meaning that those in work will also have a lower take home pay if these measures are introduced. With people having less income it will mean that they will ultimately be able to borrow less for homes. Which have reported that nine out of ten low deposit mortgage deals have been pulled; this means that buyers will have to put down larger deposits on homes, which many buyers will simply not have. A weaker economy will impact the housing market with prices being forced down due to people’s ability to buy and less buyers in general.
If the supply of housing stock outweighs the demand and people’s ability to buy is compromised this will undoubtedly drive house prices down. This impact will not be expected to happen overnight however, it would happen over a period of months. This means that if you are looking to cash in and achieve the best price for your property or land you have a window of opportunity to do so. The best way would be to act fast. We here at Auction Agent offer a fast, secure sale, with contracts exchanging at auction and completion taking place within 28 days. This means that you can achieve a fast sale at a good price without worrying about any potential price drop. We deal with all types of property including tenanted houses, tenanted commercial properties, vacant homes, vacant commercial properties, mixed use buildings and land with or without planning permission.
If you are looking to sell then please contact a member of our team to discuss your options, arrange a valuation and help with any questions that you may have.