Only one in five sales has fallen apart in light of recent events, as the UK housing market shows its resilience. But Knight Frank thinks more can still be done.
According to Knight Frank’s head of London sales, James Clarke, there’s still a surprising amount of activity in the country’s housing market. Buyers are taking a “pragmatic approach”, and while deal volumes will suffer initially, this may not continue through the year.
That’s the summary from the latest 2020 Residential Market Outlook published by the estate agent. It also predicts that a sharp fall in activity during April and May should be followed by a gradual uplift in June. During the second half of the year, Knight Frank expects a recovery in sales volumes. And in 2021, residential transactions should surpass those seen in 2019, says the report.
House price predictions
On house prices, the report adds: “Once the current crisis passes and activity begins to resume, we have to expect that weaker economic activity in the first half of 2020, the dislocation in the jobs market and weakened consumer sentiment will impact on prices. However, the relatively finite timespan of the crisis means declines will be limited.
“Our view is that mainstream UK house prices will fall by 3% in 2020 with prices in prime central London remaining unchanged following a 25% fall in some markets since 2014.
“Our expectation is that prices will recover sharply in 2021 – and have pencilled in 8% growth for prime central London prices for next year.”
GDP growth in 2019 was around 1.4%, according to Knight Frank. It expects this to fall to -4% for 2020. However, the report states it should then pick up again to 4.5% in 2021.
The predictions are based on the assumption that current restrictions will be gradually lifted through June.
Urgent stimulus required
Aside from its realistic yet optimistic outlook report, Knight Frank is urging the government to do more. In a statement released by the estate agent, it set out a five-point stimulus package.
- Stamp duty holiday: Other industry bodies have already touted this idea, including the Royal Institute for Chartered Surveyors (RICS). Knight Frank believes such a tax break would encourage people to move in the housing market.
- Extend Help to Buy: The scheme has been popular among buyers and has boosted housebuilding across the UK. An extension could boost transaction volumes, says the firm. There are already rumours that a Help to Buy extension could materialise.
- Review the conveyancing process: There have long been calls to bring the conveyancing process into the 21st century. An over-reliance on paperwork can prove detrimental during times like these, and improving efficiency should be a top priority.
- Introduce virtual planning meetings: The Coronavirus Bill, says the report, effectively allows councils to hold virtual planning meetings. This will keep things moving in spite of the lockdown. However, it argues there should also be other improvements, such as a longer timeframe for planning permissions.
- Greater flexibility around planning obligations: Knight Frank argues that the government should encourage offering staggered or staged payments in this area. This would ease cashflow issues and allow the market to keep moving.
While this month’s forecast from Knight Frank is a mixed bag, with short-term losses amid long-term recovery, the message from the firm is clear. It wants the government to bring it more measures to stimulate the housing market and encourage swifter recovery.
The finite nature of the health crisis means that we can expect to see a bounce-back in the not-too-distant future, according to the report. But how the government plans to boost the sector in the meantime will be important.