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How 2020’s property market compares to the 2008 house price crash


What will the impact of the Covid-19 pandemic be on the property market? Hiten Ganatra of Visionary Finance weighs up how it compares to the financial crisis more than a decade ago

The UK housing market suffered greatly when lockdown was ordered – just after strong signals emerged it was picking up after a difficult year in 2019.

When UK businesses were told to shut their doors in March, estate agents closed and new listings, property viewings, sales and negotiations froze – the market was paralysed.

Since lockdown for the housing market was lifted in May there’s been a clear indication of pent up demand and a surprising house price index showing that in some areas prices are rising.

However, chancellor Rishi Sunak has said it’s very likely we are in the middle of a ‘significant’ recession as we speak. Some are comparing the property market today with that of the 2008 crash that followed the financial crisis. But are there any similarities?

House prices

House prices tumbled all over the country as a result of the financial crisis. The average UK property’s value fell by 20% over 16 months, while transaction levels slumped from 1.65 million in the decade up to the crisis to 730,000 in the year to June 2009.

Recovery was slow – it took around six years for prices to reach pre-crash prices. Arguably, in some areas of Britain, they had still not recovered.

Today there’s a big question mark over the future of house prices, even with the market now back in gear. A survey by the Royal Institute of Chartered Surveyors (RICS) showed 35% of members thought prices could fall by up to 4%, and another 40% of members said prices could fall by more than 4%.

UK house prices fell by 1.7% in May, the largest monthly fall in eleven years, according to Nationwide. Many were surprised by the April house price index by Zoopla, which revealed many of the country’s regions were continuing to grow, with house prices up significantly from last year.

In fact, the growth trend in the north of England and the Midlands appears not to have been disrupted by coronavirus – so far. Nottingham is showing a 4.1% growth year-on-year in April – the highest rate in the UK.

Appetite for property searching appears to be alive and well. The property portal Rightmove recorded its busiest ever day on Wednesday 27 May, surpassing six million visits for the first time, the figure being 18% up on Wednesday 29 May 2019.


In terms of recovery, the RICS study also showed that surveyors expect sales activity to take around nine months to recover and prices around 11 months to pre-crisis levels. Experts highlight a number of reasons why we might not face the long, hard slog to recovery as after the 2008 financial crisis. Zoopla analysts state that the second half of 2020 depends on two distinct aspects.

A spokeperson says: “First is how many of the 373,000 stalled sales make it to completion. Second is how new demand for housing holds up and how much of this translates into new sales.”

It seems that the Covid-19 pandemic has prompted many to sell up and move. A study by Rightmove claims that of those who had no plans to move earlier in the year, over a quarter of them (28%) are now saying they are planning to move.

For the buy-to-let market, there could be a surge in investment purchases by those who lost money in the stock market crash and might be looking for safer investments post-pandemic particularly as companies could be refrained from issuing dividends if they have accepted state aid. This will, in turn, boost demand for rental property – and help boost prices.

Future of the mortgage market

The housing market relies upon banks and building societies being able to lend to borrowers. After the financial crisis of 2008, getting a mortgage was not easy. Many – if not all – financial institutions were finding it very difficult to raise money in the secondary market and, as a result, they had less money available to lend.

Today, however, the mortgage arena is looking positive even though there are many economic challenges ahead, we do not have a banking crisis on our hands. Banks are well capitalised today which will result in good liquidity.

For homeowners this means they will be able to sustain good levels of mortgage lending at relatively reasonable interest rates.

Lockdown switched the mortgage market off overnight and so the Bank of England figures showing a drastic drop-off in approvals and lending during April comes as no surprise.

With everything brought to a standstill for a number of weeks, banks and building societies will be keen to make up for lost time.

At the time of writing many mortgage lenders are still operating at only 50% to 60% staffing capacity with most having to operate remotely due to social distancing rules.

The mortgage holiday scheme, now extended until the end of October, has been a lifeline for homeowners who have taken an abrupt cut in income. The take-up has been huge with around 1.8 million homeowners applying for the scheme, at the last count.

Coupled with the government’s job retention scheme – also known as furlough – they appear to have cushioned much of the impact so far by limiting forced sales.

UK Finance data showed only a slight rise in mortgage arrears of at least 2.5% of mortgage balances in the first three months of the year.

Now surveyors can conduct physical valuations again, confidence has been boosted in lending and a number of lenders are now back to offering competitive mortgages rates.

What could hinder the market in 2020?
Many hurdles still stand in the way of a fluid housing market and smooth recovery. The most significant consideration is the economic position once the government support measures are slowly removed.

The analogy I have used is akin to a person suffering from a severe heart attack. They are put on a life support machine and are being pumped with drugs to help them pull through. The level of damage caused to the individual will not be known until they have come off the life support machine and are weaned off the strong painkillers.

Much like the economic impact – we aren’t going to know the true impact of this pandemic until the last three months of 2020.

There is also concern that property hunting may put both vendors and buyers at a higher risk of coming into contact with coronavirus. Sellers may still feel uneasy letting strangers into their homes for viewings.

In anticipation of the expected house price crash, there have been reports of buyers demanding huge discounts. Uncertainty and wrangling over price cuts will delay many transactions. Plus, government guidance says it may be necessary to pause house moves again to limit the spread of the virus – especially if we see a second wave of infections.

On the mortgage front, there are some challenges. Lenders are likely to be more cautious about approving loans to borrowers that have lost some of their household income and where they have relied on the payment holiday scheme.

We are in unchartered waters in the housing and mortgage market. But there are many positives at the moment for those who want to move, and for borrowers who just want to remortgage.

In many ways we are a long way from the difficulties experienced in 2008 as our mortgage market remains dynamic. With some lenders cutting mortgage rates to ever lower levels, they are sending out a clear message to borrowers that they are open for business.

The market as a whole is heavily reliant, however, upon whether we see a second wave of the virus and have to lockdown again.

Stamp duty holiday

In our view, the stamp duty cuts will encourage previously hesitant buyers to go ahead with a purchase now that – whether upsizing or downsizing – there are big savings to be made.

Those higher up the ladder and first-time buyers in more expensive cities such as London set to benefit too with the new threshold at £500,000. The measures should relieve some of the financial pressure on buyers who can now put stamp duty savings towards a deposit.

This in turn will help with getting a mortgage offer – and reduce monthly payments. While lenders are understandably being cautious in terms of affordability at the moment, they still have an appetite to lend and mortgage rates are extremely attractive.

Enlisting the help of a broker is important right now, so you can approach the right lender for your individual circumstances and potentially take advantage of the current market conditions and recent announcements.

Hiten Ganatra is managing director of Visionary Finance

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