The Coronavirus pandemic has wreaked havoc on the economy, with the UK officially going into recession in 2020 for the first time in 11 years. But is it really all bad news?
What is a Recession?
A recession is officially caused when the economy shrinks for two consecutive quarters, which occurred during the first half of 2020.
The nationwide lockdown due to the coronavirus pandemic led to a record 20.4% fall between April and June, which followed a 2.2% drop between January and March.
Despite a slight recovery in the second half of the year, due to the ongoing COVID situation, it’s unlikely that the economy will bounce back to pre-covid levels anytime soon.
The government’s Stamp Duty holiday and furlough scheme – or Job Retention Scheme to give it it’s full title, have both helped to keep the property market booming in recent months, but with the Stamp Duty holiday due to end on 31st March and the furlough scheme coming to a close on 30th April, 2021 is forecast to be a rocky road for the property industry.
How Will This Affect House Prices?
We can’t say with 100% certainty exactly how house prices will be affected, however, based on previous recessions, it’s very likely there’ll be an eventual drop in value for many properties. Much will depend on what happens after the Stamp Duty holiday and furlough schemes end.
Some property commentators believe that prices could fall as much as 25%, but depending on how quickly the economy can bounce back in a post-covid world, the drop in value may not be as sharp as that.
A drop in prices is seemingly inevitable due to rising unemployment levels, reduced salaries for those on furlough and pay freezes for those lucky enough to have remained in full-time employment throughout the pandemic.
Should the Stamp Duty holiday be extended then it may be sufficient to keep property prices relatively stable. Similarly, if the furlough scheme is extended beyond April and a large proportion of people who are benefitting from it can retain their jobs and get back to full-time salaries then the fall in property prices may not be so dramatic.
As with 2020 there’s likely to be a lot of uncertainty over the next few months, and the key to whether prices drop significantly or not, will rely on how quickly the economic recovery happens once lockdown ends and life begins to return to normal.
Is Now a Good Time to Buy a Property?
This of course will depend on your individual circumstances. Yes it may be a good time to buy, but not for everyone.
If you have a stable income that’s been unaffected by the pandemic and your job is as secure as it can be, then of course a drop in prices is beneficial for you as a buyer.
Be aware though, generally speaking it’s harder to borrow money in a recession so you’re likely to need a larger deposit and there may be fewer mortgage deals available.
Is Now a Good Time to Sell a Property?
The market is currently still buoyant and so for most homeowners, it is a good time to sell your property. Even in a recession, people still need to move home and desirable areas will always remain desirable.
For example, during the first lockdown, some of the major property websites reported a big jump in visitors searching for countryside properties with a garden, while flats in city centres saw a fall in demand.
Therefore, depending on the type of property you own and its location, it may hold its value well, regardless of a recession.
How Will a Recession Affect Me If I’m Planning to Stay in my Property?
Again, we can only make an educated estimate based on the last recession, however, you may benefit from a fall in interest rates on your mortgage, leaving you with more disposable income each month. The fall in interest rates could also lead to some good deals out there for homeowners.
Finally, if you’re not planning on selling your property in Chesterfield just yet, then if a fall in its value does occur, this doesn’t need to be alarming. In the long term you can usually expect the value of your property to increase again.
For more expert property advice in Chesterfield, call our experienced and friendly team on 01246 211646.