Market Forecast: 38% collapse in transactions plus modest price fall

The latest market forecast comes from Knight Frank which says that by the end of the year there will have been a 38 per cent collapse in transactions.

This is based on the assumption that the current lockdown will remain in place through April and May, with a gradual lifting through June.

The firm therefore predicts a full-year collapse of 38 per cent in sales, meaning an anticipated 734,000 transactions will be conducted over the full year.

Knight Frank also forecasts mainstream UK house prices to fall by three per cent in 2020 - although prices in the prime central London enclave will remain largely unchanged. 

The firm expects prices to recover sharply in 2021 citing an eight per cent growth for prime central London prices for next year.

“The underlying economic forecast we have adopted points to a contraction of GDP of 4.0 per cent in 2020 and growth of 4.5 per cent in 2021. The actual outturn will be determined by the timeframe imposed by the lockdown” explains Liam Bailey, global head of research at Knight Frank.

“The housing market was in a strong position in January and February … While we expect a revival in activity to continue, with volumes next year expected to be 18 per cent above the level seen in 2019, this expansion in sales in 2021 will not fully offset the losses seen this year. Meaning that of the nearly 526,000 sales we expect to be lost due to lockdown this year, less than half will be carried into 2021” he continues.

“For the government to see a full recovery of the market, with all of these lost sales carried forward, there will be a need for substantial incentives to ease market liquidity - including a reduction in stamp duty” he concludes.