After a strong start to 2020 in the housing market, we've seen a sharp fall in interest from buyers since the coronavirus pandemic started spreading across the UK.
Demand from buyers over the seven days to 22 March was down 40% on the previous week, according to our latest Zoopla Cities House Price Index Report.
Would-be homebuyers paused major decisions and took stock of the unfolding events in the UK and around the world, even before the UK-wide lockdownannounced by Prime Minister Boris Johnson.
Strong start to the year
The UK housing market had its strongest start for four years in January and February 2020 on the back of the confidence given by December's General Election result.
This resulted in an average +1.6% annual growth across the 20 cities tracked in our House Price Index.
Richard Donnell, Director of Research and Insight at Zoopla, said: "Coronavirus presents a major new challenge - not just for the housing market but for the UK and global economies.
"Fifty years of history shows that external shocks have impacted the housing market to differing degrees, largely down to the scale of direct impact on the UK economy.
"The initial impact of external shocks is to reduce consumer confidence and put a brake on housing demand and the number of people moving home, which we can see in our latest figures.
What can buyers and sellers expect in the short-term?
Property sales already agreed and moving towards exchange of contract are continuing, but a rapidly increasing proportion of sales are starting to fall through, as buyers reassess whether to make a large financial decision in these shifting times.
Homes are continuing to be listed for sale, but at a slowing rate.
For those with homes currently listed for sale, there is no immediate rush to withdraw their home from the market, particularly as agents are responding positively to the pandemic by proving virtual viewings for potential buyers.
That said, it’s anticipated that some sellers will withdraw their home for sale for a period, or at least discuss different marketing opportunities with their estate agent.
What's the outlook for the next few months?
Interest from new buyers has fallen dramatically, but the housing market has not ground to a complete standstill.
Sales continue to be agreed, but at a slower rate. Based on the 16-22 March 2020 period, sales were down 15% from the previous week and 4% below levels recorded at the same time in 2019.
Zoopla's research team expects a fall in buyer demand to culminate in fewer people moving in the summer months. This takes into account the time lag between marketing a home to agreeing a sale and completing - a process that can take four to six months.
But the scale of the property market downturn is dependent on the effectiveness of the government's action to support jobs and the wider economy.
Donnell said: "The outlook for house prices largely depends upon how the government’s major package of support for business and households reduces the scale of the economic impact.
"Low mortgage rates mean forbearance will remain the preferred choice for lenders, but further government support in these unique times cannot be ruled out.
"The timing of any rebound in housing market activity depends upon when new restrictions are lifted, and the extent to which households and businesses are able to return to a normal way of life.
"Browsing for homes online is set to continue and, while demand for property may rebound quickly, it will take several months for agents to rebuild new business pipelines."
Top 3 takeaways
1. The impact of coronavirus has led to a 40% drop in demand from buyers in one week (seven days to 22 March compared to the previous week to 15 March)
2. The UK property market had its strongest start for four years in January and February 2020
3. Buyers continue to agree new home purchases (sold subject to contract and two-to-three months from completion) - although new sales agreed were down 15%