What shape will the property market recovery take?

There is much debate about when the UK housing market will recover from the economic impacts of the current coronavirus.

There is typically one main argument for why house prices may fall over the coming months and that centres around a rise in unemployment. This would lead to a lack of affordability and eventually an oversupply of property on the market, as mortgage defaults increase.

However, there seems to be many reasons for a short, sharp shock followed by an equally sharp upturn – in what many industry commentators are calling the V shaped recovery.

Here’s why:

1. Low interest rates (possibly negative) will stimulate the economy and force people to spend and invest, rather than save their money in banks.

2. The stock market is likely to be quite volatile in the short term and investors need to put their money in safer investments.

3. The Government has offered a £330bn fiscal stimulus with new initiatives to prop up the economy, being released almost weekly.

4. All this borrowing will inevitably lead to an inflation in prices, including an increase in house prices too.

5. The low Exchange rates will tempt in more international investors as the demand for a safe haven during this volatile time, increases.

6. There were record low levels of stock in the property market prior to coronavirus and this coupled with the fact that more people than ever are looking to take advantage of the returns in the Northern Property markets will lead to an increase in house prices in the North.

7. There is a huge amount of pent up demand, initially from the elections in December and then from the BREXIT decision in January. Now coronavirus has meant many people have not been able to move and this demand has been building for almost a year.

8. In many cases, people may well be financially better off as they have had no expenses. This coupled with the fear of losing their single income source (their job) may increase people’s propensity to invest, increasing the property values.

We can see why many people consider the drop in house prices to be short-lived and many are preparing for a sharp recovery.

Let us know what you think…

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*source courtesy of Savills UK