Property demand has risen sharply as buyers return to the market, but this short-lived bounce will not be enough to stop house prices falling, estate agents have warned.
A survey by the Royal Institution of Chartered Surveyors showed that agents were the most pessimistic about house price growth since 2010.
It found that buyer inquiries have rebounded strongly, in part driven by demand for homes with homes with green space. The level of new listings is recovering, and estate agents are now more optimistic about the number of agreed sales over the next year.
Simon Rubinsohn, of Rics, said that these figures reflected the fact that deals made before lockdown are now going through, but he cautioned that this new momentum will likely be short-lived.
“Much will depend on the macro environment and, in particular, the resilience of the jobs market as the furlough scheme unwinds,” he said.
A crunch point could be in the autumn when the furlough scheme, which is supporting the wages of 8.7million people, is due to end. At this time, mortgage holidays that have been taken up by one in seven households will also stop. Meanwhile, universal credit claims are spiking.
The Rics survey also found that buyer demand for homes in tower blocks or in dense urban areas will fall, while that for properties with gardens and balconies or proximity to more green space will rise.
Mr Rubinsohn added: “These and other similar features are likely to increasingly command a premium over higher density urban locations.”
The rise of working from home and a desire for larger homes after months stuck in lockdown means agents have reported a drop in demand for London property and a surge in interest in the regions, particularly on the south coast.
The prime end of the housing market is leading the recovery. Across the UK, the number of house sales agreed at £1m and above in the first week of June was 16pc higher than in early March, according to property portal Zoopla. But these sales account for just 3pc of overall agreed sales.
Lucian Cook of Savills said buyers at the top end of the market have more immunity against the effects of the downturn. “They have a cushion of wealth that they can rely on, and their buying power is less affected by the availability of high loan-to-value mortgages.”
Lenders have largely withdrawn mortgages for buyers with small deposits. A few banks had brought back mortgages for people with 10pc deposits after the market reopened, but these have now been pulled by Virgin Money, Accord Mortgages and Clydesdale Bank due to the economic uncertainty. Many entry level purchasers are cut out of the market altogether.
But even the wealthy buyers could dry up once the pent-up demand from lockdown runs its course and the forecast recession sets in. “We could see transaction levels fall back later in the year,” said Mr Cook.
“I still think mainstream prices will show a 5 to 10pc drop in 2020,” he added.
The number of agreed sales in Britain has jumped by 137pc in the month since the market reopened, according to property portal Zoopla. The figure is now just 12pc below the level seen at the beginning of March, before the coronavirus outbreak took hold.
There were no meaningful changes in Scotland, Wales and Northern Ireland, where the housing markets remain shut and agent expectations remain low, Rics found.