Lockdown measures pushed the UK into a recession, it was confirmed on 12 August.
The recession is the biggest in UK history, with Gross Domestic Product (GDP) declining by over 20 per cent in the second quarter of 2020.
The last recession, known as the Great Recession, lasted 15 months from 2008 to 2009 and caused mass unemployment, increases in inequality, and the widespread failure of smaller businesses. This resulted in less demand for property and a subsequent drop in prices.
But what will happen to house prices during this recession?
What usually happens to house prices during a recession?
Typically, bad economic performance has a knock-on effect on the property market. With jobs lost and finances tight, a slowdown of the housing market generally follows.
During the Great Recession, UK house prices dropped by 18.7 per cent between the third quarter of 2007 and the first quarter of 2009.
From 1989 to 1993, house prices fell by 20.2 per cent as a result of the early 1990s recession.
Will that happen this time?
Not necessarily. The current recession was caused by a public health crisis, while the Great Recession started as a result of the financial crisis.
The government’s unprecedented steps during the coronavirus pandemic to save jobs mean that job losses could be limited and property demand could remain high. Though the housing market reached a standstill during lockdown, it has bounced back since the reopening of the economy.
There are fears that economic hardships have merely been delayed by government action, however
For instance, when the furlough scheme ends in October, significant job losses could follow. If this were to occur, demand for property would decline and house prices could fall. If house prices were to fall, owners would be less likely to sell.
A stamp duty tax, introduced by Chancellor Rishi Sunak, ends in March. This could also result in a slump in the market.
Nationwide said that the future of the housing market is "highly uncertain.”
What has happened to house prices this year?
Remarkably, house prices jumped to a new high in July rising by 1.6 per cent.
This was the first increase in prices recorded for five months, with homebuyers eager to buy following the market’s reopening.
In June, the UK recorded its first annual fall for eight years due to the halting of viewings and the plummeting of sales caused by the coronavirus pandemic.