The UK’s property market reopened this week but with activity all but wiped out for two months and a potentially severe recession on the horizon, it remains to be seen how prices will be impacted. A recent survey by The Royal Institution of Chartered Surveyors predicts that average selling prices will be down around 4% across Britain and will take until next Easter to recover.
However, other analysts see that as optimistic and think prices could take a hit similar to that seen in the wake of the 2008 crisis. But with both optimistic and pessimistic scenarios indicating some kind of price slide, will the months ahead represent the perfect time for liquid investors to acquire investment properties at bargain prices ahead of a recovery?
The RICS survey polled 360 surveyor branches around the UK, with a key takeaway from the data returned the fact that the level of new instructions since March dropped to its lowest since the survey began in 1999. 96% of respondents reported a drop in the number of new properties being listed for sale and 80% reported buyers pulling out of transactions since late March.
92% of the surveyors that took part in the survey said newly agreed sales were down and 93% reported a slump in new buyer inquiries over April. On average, surveyors predicted that it would take 9 months for prices to return to the levels they were at before the start of the pandemic lockdown.
Quoted in The Times, Casey O’Donovan, a surveyor at Indigoscott of London commented: “Whilst market conditions or a potential recession are of concern, job security and salary reductions are also influencing the decision not to proceed.”
Around a third of surveyors responded that they expected prices to start at around 4% down on pre-lockdown levels and 40% thought the drop could be more than 4%. However, with the estimates provided by surveyors taking part in the regular survey notoriously optimistic, it could well be that prices drop by considerably more over coming months. The availability of mortgages will be key, which could open the door for investors able to put down larger deposits on investment properties.
However, property investors may be wary of falling rents in the short term. Surveyors expect rents to fall over the next three months, though a majority also believe they will have stabilised within a year and have returned to annual average growth of 2.5% within 5 years.
After the 2008 international financial crisis, UK property prices dropped by an average of 16%. Drops are not expected to be as severe now but much will depend on the extent of the post-lockdown recession.
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