Market set for long-term recovery despite short-term dips

The housing market is set for long-term recovery, despite dips in the road on the way. 

That's the message from the latest house price index from the Halifax, which reveals a 0.2 per cent month-on-month decline in property values in May.

“This is the third successive monthly fall, though more modest than in April, and reflects a continued loss of momentum following what was a strong start to the year” according to Russell Galley, managing director at Halifax.

“Though it should still be noted that with a limited number of transactions available, calculating average house prices remains challenging and increased volatility is to be expected.”

But he says the ending of the lockdown is likely to be seen as a boost to sales, and long term there is likely to be a recovery.

“Looking ahead, we expect market activity to increase progressively as restrictions are eased further across the whole of the UK and we continue to have confidence in the underlying health of the housing market over the long term.

“However, the extent of downward pressure on market confidence and prices over the coming months will depend on how quickly the economy is able to recover from the effects of the pandemic and the available government policy support for jobs and households.”

Jeremy Leaf, the London estate agent who is also a former residential chairman of the Royal Institution of Chartered Surveyors, says: “Unlike the rather gloomy Nationwide figures from a few days ago, Halifax demonstrates a more hopeful picture for the market, even though prices have fallen for three successive months while emerging from the eye of the Covid storm.

“On the ground, activity has certainly picked up from its very low base, with many of the pre-lockdown sales put on hold resuming, albeit cautiously as buyers and sellers come to terms with the new normal.

“Values are holding fairly firm so far, particularly for smaller houses but demand for flats remains weak, caused by uncertainty over post-furlough employment prospects.”

And Mike Scott, chief analyst for online agency Yopa, adds: "The fundamentals of the housing market were strong before the lockdown began, but the size and speed of the recovery that is now beginning will depend on the effect of the lockdown on unemployment levels, consumer confidence, and the availability of mortgages, particularly first-time-buyer mortgages lending a high proportion of the purchase price and so requiring relatively small deposits.”