Individual spring months may see newly agreed sales down by up to 80%.
Housing transactions are set to drop by as much as 60% over the next three months as the market reacts to the impact of COVID-19 according to the latest UK Cities House Price Index by Zoopla.
Prior to the outbreak, the UK housing market got off to its strongest start for four years as average house price growth reached 1.6% across UK cities in February.
Buyer demand over the seven days to 22 March was reportedly down 40% on the level recorded one week prior, as potential homebuyers took a pause following the outbreak.
Purchases already agreed and moving towards exchange of contract are continuing, but a rapidly growing proportion of sales are starting to fall-through, as buyers reassess their decision.
Interest from new buyers has fallen, but the market has not ground to a complete standstill according to the index.
Sales continue to be agreed at a slower rate, with current figures being 4% below levels recorded a year ago.
A fall in demand is expected to culminate in a reduction in sales agreed towards the end of the quarter and into the summer months.
Zoopla research modelling indicates a fall in transaction volumes of up to 60% over the second quarter of 2020, with low transaction volumes expected to continue into the third quarter.
Individual spring months may see newly agreed sales down by up to 80%.
House prices are not expected to change materially in the next month or two according to Zoopla, particularly as a proportion of sales agreed in the last two months will continue to completion.
Richard Donnell, director of research and insight at Zoopla, said: “COVID-19 presents a major new challenge - not just for the housing market but for the UK and global economies.
"Fifty years of history shows that external shocks have impacted the housing market to differing degrees, largely down to the scale of direct impact on the UK economy.
“The initial impact of external shocks is to reduce consumer confidence and put a brake on housing demand and the number of people moving home, which we can see in our latest figures. Levels of property transactions are typically more volatile than changes in house prices.
“We do not expect any immediate impact on prices. Beyond this, the outlook for house prices largely depends upon how the government’s major package of support for business and households reduces the scale of the economic impact.
"Low mortgage rates mean forbearance will remain the preferred choice for lenders, but further government support in these unique times cannot be ruled out.
“The timing of any rebound in housing market activity depends upon when new restrictions are lifted, and the extent to which households and businesses are able to return to a normal way of life.
"Browsing for homes online is set to continue and, while demand for property may rebound quickly, it will take several months for agents to rebuild new business pipelines.”
