Housing Secretary Robert Jenrick has taken the shackles off the market as part of a broader easing of restrictions imposed in March to slow the outbreak
The UK’s plan to revive the battered housing market could help unlock about 82 billion pounds ($100 billion) of deals put on hold by the government’s coronavirus lockdown, though prices could take some time to recover.
Housing Secretary Robert Jenrick has taken the shackles off the market as part of a broader easing of restrictions imposed in March to slow the outbreak. That means realtors can show homes again and moving companies can get back to work, as well as easing some rules for homebuilders.
This should allow about 373,000 stalled sales to move forward, giving a boost to the slumping economy, according to Charlie Bryant, chief executive officer of property portal Zoopla Ltd.
The restart plan may take time to show results, however, with the country mired in what Chancellor of the Exchequer Rishi Sunak has called a “significant recession” this year. House prices are expected to be lower as the market reopens and they probably won’t recover for about a year, according to a report on Thursday from the Royal Institution of Chartered Surveyors, a housing industry group.
“It will be a struggle to get confidence back to where it was as recently as February,” Simon Rubinsohn, chief economist at RICS, said in a statement. “Whether this can be realized will largely depend on how the pandemic pans out and what this means for the macroeconomic environment.”
Knight Frank also responded cautiously to the government’s plan. The property broker is sticking with its forecast for house prices to fall by 5% in prime London locations and by 7% elsewhere in the UK, a spokesman said on Wednesday. The property broker first issued its report on prices shortly before Jenrick’s announcement.
Still, the initial response from companies in the housing industry was positive. Homebuilder Taylor Wimpey Plcsaid it expects to recall most of its furloughed sales staff by May 18, as well as reopening show homes and sales centres. Persimmon Plc said it has resumed construction of new homes. Zoopla early on Wednesday recorded a 139% increase in the number of potential buyers browsing on its portal compared with average demand over the previous four weeks.
The UK housing market effectively shut down in March, and the situation only worsened last month, according to RICS. In its April survey of the residential market, 80% of respondents saw both buyers and sellers pulling out of transactions, and a measure of new instructions to sell fell to a record low.
New listings of homes were 90% lower after the lockdown was imposed, according to Knight Frank. Prior to the outbreak, the UK housing market was off to its best start in four years, according to Zoopla’s UK cities index.
The huge number of stalled house deals, and the vast network of companies and jobs involved in the industry such as builders, suppliers and realtors, were probably what “drove the government to seek to reopen the property market,” Zoopla’s Bryant said.
“With few if any transactions, there is no visibility and no precedent with which to accurately judge the state of the housing market,” Jenrick said on Wednesday in televised remarks. “But history tells us that in every economic recovery in modern British economic life, the housing market has been key to recovery and revival.”
The government will probably have to do more to get the housing market running smoothly and to give developers the “confidence to continue building in these very difficult circumstances,” according to RICS economist Rubinsohn.
In the RICS survey, a majority of respondents said that temporarily waiving stamp duty, a tax the UK imposes on property transactions, would help the market to recover.