The author is founder and director at housing market analysis company household experts

Great britain is slowly adjusting to the biggest financial and personal surprise of history 75 years. weekly brings more news of work losings and harm to the economy, but it also brings development of a booming housing industry. issue many are asking is excatly why the housing industry seems protected to the outcomes of covid-19. will home rates never drop?

The solution is difficult. it will be possible for house rates to-fall. recessions and house-price corrections went hand-in-hand in decades last. with this in mind, as britain went into lockdown in march it had been commonly predicted there will be a fall in-house rates. the market shutdown appeared to provide some insulation through the instant influence of a recession, but job manages to lose, drops in income and a credit crunch all foretold a time period of gloom. yet considering that the housing marketplace reopened, there have actually alternatively already been signs of a boom across usually peaceful summertime.

This could be noticed in both the continued rise in prices and a jump in task on the market. nationwide, the building society, stated that united kingdom residence rates struck an all-time high in august and zoopla, the property detailing website, reported the number of product sales agreed in august had been 76 % above their five-year average. bank of the united kingdomt data showed a v-shaped recovery in mortgage approvals in july.

Line chart of annual percent change showing recessions in the united kingdom usually coincide with a fall-in real home prices

An increase might seem unreasonable given the influence of the pandemic, particularly because various other expensive housing markets, eg san francisco bay area and nyc, are witnessing a reversal. but there are many factors why united kingdom house rates have not fallen (yet).

This time it really had been different. for probably the very first time in 50 years, the uks housing industry was not accountable for, or right implicated in, the downturn. there are several difficulties with housing however it was not a bubble fit to-burst such as 1989 or 2007. while residence costs are high in accordance with earnings, these were not unreasonable given attractive lending conditions. because the crisis began, furlough schemes and mortgage repayment holidays have actually delayed the bad effect on the market.

It is also really worth recalling that residence costs are based on sales that actually take place. if somebody cannot afford to buy, their particular incapacity doesnt count in house cost statistics. unfortunately, it seems the pandemics financial fallout has actually mainly been felt because of the young and reduced earners those already the very least able to buy. the recession restricting mortgages for first-time buyers can also be widening the economic divide. the reality that more people tend to be listed out of the market won't have an impact on house rates.

Meanwhile, those individuals who have seen no economic impact through the pandemic are able to spend the exact same price for property as before. they might actually capable provide even more if their savings have risen thanks to spending less during lockdown. it is these purchasers that are currently driving the boost in home costs. utilizing the few transactions low, it generally does not just take many additional expenditures to push-up rates in virtually any given month. similarly, it would perhaps not simply take many required sales to press household costs down but, for the moment, reasonable home loan prices and repayment vacations indicate most home owners will stay tight if they cant sell for cost they want or need.

The old estate broker adage that place is the most important function of any home in addition appears to be undergoing a rethink thanks to the pandemic. becoming caught yourself has actually led some audience to rethink what they want and need from home. numerous are finding that a home based job, for at the very least the main few days, is a newly viable choice. at the very least a number of the current growth may be put-down to those men and women searching for a garden, home office, or perhaps even more area generally speaking at the expense of a central place. utilizing the additional boost of a stamp responsibility holiday, lockdown makes going household a much less daunting possibility for those who can afford to. wealthier buyers quitting london be seemingly a big section of this trend, that is in addition evident in other international megacities.

And thus residence rates and marketplace activity press higher. yet it appears not likely that the market can continue to be immune permanently. the failure of a covid-19 vaccine to arise in the coming months and a no-deal brexit are both real opportunities. furloughs, bans on repossessions, home loan holiday breaks while the stamp task vacation will all end. however, a future of persistently high home costs at far lower exchange levels is an actual chance.