In one of the last releases of data from the pre-COVID-19 period, Nationwide has revealed in its latest House Price Index that the housing market was actually gathering momentum before the effects of the pandemic began to be felt.
In March, the average price of a home was £219,583. This represented an annual growth rate of three per cent, the fastest seen since January 2018. Momentum in the pre-COVID-19 period was very much a recent trend, as month-on-month prices grew 0.8 per cent in March.
At the latest count, over 50,000 cases of COVID-19 have been recorded in the UK, with over 1.5 million cases worldwide.
Snapshot of the pre-COVID-19 era
Nationwide’s March 2020 House Price Index reveals a tantalising insight into the fundamental strength that was observed in the UK housing market just a month ago. One of the biggest shifts in the housing market has been the effective freeze in the mortgage market.
One of the biggest players in putting a pause on new mortgage deals was Nationwide themselves. If you were a first-time buyer or an existing homeowner with little in the way of equity, you would be hard-pressed to obtain a mortgage at present.
Robert Gardner, chief economist at Nationwide, commented on the expected disruption to be expected in future releases, saying: “A lack of transactions will make gauging house price trends difficult in the coming months. The medium-term outlook for the housing market is also highly uncertain, where much will depend on the performance of the wider economy.”
Economy shrinks sharply in March
Initial readings for economic activity in March suggest that it dropped sharply. IHS Markit, which releases monthly estimates for economic output for a number of countries, uses 50 points as a baseline. Readings above 50 suggest growth, and those below 50 suggest contraction.
The UK’s composite output PMI, which is adjusted to reflect the size of the services and manufacturing sectors, gave a reading of 36 in March 2020, having hovered just above 50 the previous month. IHS Markit implied that the economy could be contracting by as much as 1.5-2 per cent, as it heads into the second quarter.
Such a drop in GDP would be the worst seen since the 2008-09 recession. Despite signs of an imminent downturn, Nationwide expressed some optimism that policy makers could help a recovery take hold.
Low interest rates, as well as policies such as the Government stepping in to pay 80 per cent of some workers’ wages, have all been implemented to keep unemployment low and boost purchasing power.
Mr Gardner added: “The raft of economic policies adopted to support the economy to protect businesses and jobs, to support peoples’ incomes and keep borrowing costs down, should set the stage for a strong rebound once the shock passes, and help limit long-term damage to the economy.”