House sales in the UK are poised to “collapse” this year amid the ongoing pandemic, though house prices are only predicted to fall 3%, according to new research from Knight Frank.
In the consultancy group’s latest Residential Market Outlook, it predicted that the number of house sales in the UK would fall to 734,000 this year, down from 1,175,000 the year prior.
This marks a 38% decline from the level seen in 2019, with slightly smaller falls seen in Greater London and in the prime central London market.
While the group expects a revival in activity going forward, with volumes next year expected to be 18% above the level seen in 2019, it warned that the expansion would not “not fully offset” the drop in 2020.
Of the nearly 526,000 sales it expects to be “lost” this year, fewer than half will be carried into 2021.
It warned that there will be a need for “substantial incentives” to ease market liquidity , including a reform to stamp duty, in order for the government to see a “full recovery” of the market following “lost” sales.
The group is not predicting a collapse in house prices, however, which it said started to “revive” at the start of the year.
It predicts that UK house prices will only fall by 3% in 2020, with prices in prime central London remaining unchanged following a 25% fall since 2014.
It also believes that prices will “recover sharply” in 2021, with prime central London prices expected to rise 8% for next year.
Liam Bailey, global head of research at Knight Frank, said: “The key factor that will determine the performance of the UK economy is the speed with which the government feels able to relax the current movement restrictions that prevent many businesses from operating.
“Our outlook is based on the assumption that current restrictions will remain in place during April and May with a gradual lifting through June. Any loosening before this time implies an improvement in the activity levels and price movements we are forecasting.”
He added: “The political certainty provided by last December’s general election boosted housing market confidence during January and February.
“A sharp uptick in sales was seen across the UK, with even the prime central London market seeing prices climb for the first time in five years. These positive trends were expected to have continued through 2020, but the arrival of Covid-19 put this recovery on hold.”