Property Market Monitor: July 2020

Data from the Nationwide House Price Index shows that UK house price growth turned negative in June for the first time since 2012. The weakness observed in the June data was expected: this lagged data reflects the full scale of the April and May lockdown. However, more recently the mood in the property market has started to turn after the Prime Minister’s pledge to put the government’s ‘arms around people at a time of crisis’ and ‘build, build, build’ to dig the UK out of the crisis. Mr. Johnson’s promise could be a game changer if it goes hand in hand with greater access to finance for the tens of thousands of small property developers and construction companies left bruised by the pandemic. This also represents a unique opportunity for investors using peer-to-peer platform to lend on deals.

Chart of the month: Monthly UK house price, annual % change

Picture 1

Source: Nationwide House Price Index

Market Commentary

  • As expected, the impact of the lockdown on UK house prices was reflected in June. The Nationwide House Price Index shows that UK annual price growth ground to a halt in June with prices down by 0.1% year-on-year. This represented the first negative annual growth since 2012. That said, due to the strength of house price growth during the first quarter of the year following the December general election, house prices are still up by 2.1% on a year-to-date basis compared to the first six months of last year. In the first four months of 2020, before the pandemic struck, the UK housing market had been steadily gathering very strong momentum and April saw the strongest monthly house price growth since May 2015. The period up until April was the longest period of sustained year-on-year price growth over the past five years, which will amplify the scale of the current market correction.
  • Looking at monthly trends, UK house prices were down by 1.4% month-on-month, the second consecutive month of decline. That said, June’s 1.4% decline was less steep than May’s 1.7% drop, one of the largest month-on-month declines in Nationwide’s series since it started in 1991. Given that the impact of the slowdown on the data tends to show with a lag due to the way the Nationwide House Price Index, it is likely that May’s 1.7% decline reflected the full lockdown in April when according to HMRC residential property transaction were down by 53%, while the slight pick-up in activity in May is reflected in the less steep decline of the June data.
  • It is unsurprising that annual house price growth has stalled, given the magnitude of the shock to the economy as a result of the pandemic. Economic output fell by an unprecedented 25% over the course of March and April – almost four times more than during the entire Global Financial Crisis in 2008-09.
  • Figures 1 this month shows how following a period of weakness following the Brexit vote in 2016, the UK property market had started to gather momentum in Q4 2019.

Figure 1: Quarterly UK house price, annual % change

Picture 2

As you will have seen in recent emails, we are back in the office following the lockdown, and are working very hard to continue to bring you great risk/reward property-secured loans. Our underwriting team at Blend Network remain very busy assessing deals to ensure we continue lending to experienced property developers who come to us with a solid project, an enviable track record and a strong exit strategy. Keep an eye for new loans coming at www.blendnetwork.com.

 

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