UK Housing Market June Update

Photo by Ali Yaqub on Unsplash

The UK Housing Market – June 2020 Update

As part of our weekly blog series, we have looked at lockdown measures put in place as a result of the Covid-19 pandemic and the subsequent effect on various industries and economic indicators. In the UK, we are now into the fourth month of lockdown measures, and with this, economic data is starting to pick up on the effects of the drop in commercial activity in the UK. 

Reopening of the Housing Market

Communities Minister Robert Jenrick announced the reopening of the housing market in line with an easing of lockdown measures in mid-May. While he stressed a preference for virtual viewings where possible, he stated that there was ‘a clear plan to ensure the safety of everybody involved in’ property transactions. These measures are clearly coming at an opportunity, given that HMRC estimates that residential property transactions were down 53.4% in April.[1] We expect that further loosening of lockdown measures will boost this figure for May and beyond.

Significant House Price Shocks

In its monthly housing index report, high street lender Nationwide reported a monthly change in house prices of -1.7%[2], which translates to a decrease of around £4000 in the average house price.[3] It’s important to remember however that this is an average figure, and certain niches in the property market have likely weathered the shock so far, or even increased in price. Estate agents across the country have reported a surge in enquiries for housing in areas such as Winchester and Berkshire, likely due to the growing importance of working from home.[4] Nevertheless, the monthly fall in house prices was the largest since February 2009, which marked the middle of a global financial crisis caused by the failure of mortgage-backed securities, catastrophically undermining the global markets.

Unease Among Buyers and Lenders

Many of those who might have forged plans to buy a house last November amid record stock market performance may well have now shifted them to the back-burner, since uncertainty about income and jobs is likely to have put many off making significant purchases. In fact, the data appear to show Britons attempting to give themselves a clean financial bill of health; the Bank of England reported that households paid off £5bn of credit card debt in April alone,[5] which is around 16x more than the usual monthly figure. It therefore appears that consumers are preparing for a potentially turbulent economic period ahead.

Lenders are also showing restraint, with mortgage borrowing falling to £14.4bn in April (38% less than in February)[6]. Given the huge impact on jobs, the risk of lending to consumers has increased dramatically, hence the sharp drop in mortgage approvals as seen below.

Source: Bank of England – Money and Credit April 2020

Falling Interest Rates 

As we covered in our last blog, the BoE has enacted a decrease in the base rate which governs its lending to financial institutions in the UK. Although mortgage approvals have fallen, the interest rate accompanying many high street mortgage products has also fallen. It however remains to be seen if consumers take advantage of loans that now represent comparatively better value given the squeeze on incomes and already-significant consumer debt levels. Lenders are also revaluating their offering, and removing their riskier products where appropriate. Moneyfacts.co.uk found that the number of 95% loan-to-value 2-year fixed products available on the market has halved from May to June,[7] a trend which is likely to persist as long as valuation data remains opaque as a result of a dearth of physical valuations. This trend is the first sign of an attempt from lenders to de-risk their offerings, in consideration of the economic effects wrought by the pandemic.

Yielders and The Market 

As a platform, we are always watching the market carefully to assess the opportunities and impacts on our investors. Our unique debt and leverage free model allows for investor flexibility when it comes to investment exit. Moreover, as a cash buyer, we are uniquely placed to take advantage of prevailing economic conditions and falling house prices. As facets of the market have reopened we have been preparing to restore the posting of new assets to the website, which we hope to start again in the next few weeks. In the meantime, keep an eye out on for properties listed our Secondary Market, and we will be back next week with more interesting insight into the world of Islamic FinTech and Anti Money Laundering.

[2] https://www.nationwide.co.uk/-/media/MainSite/documents/about/house-price-index/2020/May_2020.pdf

[3] https://www.independent.co.uk/news/business/news/uk-house-prices-fall-latest-nationwide-may-coronavirus-a9544096.html

[4] https://www.theguardian.com/money/2020/may/08/homebuyers-plotting-move-to-country-amid-increased-home-working

[5] https://www.bankofengland.co.uk/statistics/money-and-credit/2020/april-2020

[6] https://www.bankofengland.co.uk/statistics/money-and-credit/2020/april-2020

[7]https://www.propertywire.com/news/95-ltv-mortgage-deals-fall


Yielders does not provide any advice in relation to investments and you must rely on your own due diligence before investing. Investments in property and unlisted shares carry risk and you may not receive the anticipated returns and your capital may be at risk.

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