Will house prices crash when furlough ends?

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House prices soared when lockdown was eased, with prices seeing the biggest monthly rise in 16 years in August. This boom has been caused by higher demands, since many people wanted to move before lockdown but couldn’t because of restrictions. On top of that, people want to take advantage of the mortgage holiday scheme and stamp duty holiday. However, the UK is officially in a recession and the Government’s furlough scheme is about to end. This has left us all wondering what will happen to house prices next. Will house prices crash when furlough ends?

The Government’s furlough scheme will end this Saturday, October 31.

The scheme is not being extended, but it is being replaced by a Jobs Support Scheme which will allow businesses to keep employers working but on shorter hours.

The scheme will cover the cost of two thirds of the pay the employees have lost by having their hours cut.

A staggering 1.7 million people were still on furlough in mid-October, and some economists have predicted that the unemployment rate will soar.

Despite everything, the property market is still booming at the moment. But will it last?

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Will house prices crash when furlough ends?

The mini boom is predicted to be short lived, but this doesn’t mean house prices will crash when furlough ends.

However, Mike Fitzgerald, Executive Chairman at Coulters Property has predicted that they will still drop.

He commented: “The housing market recovered a lot faster than anticipated at the start of the pandemic.

“Lockdown and the rise of remote working made many people reconsider where they want to live, which in return created a backlog of people wanting to move house.

“However, this is known as a ‘mini boom’ in the industry and is believed to be short lived for two reasons; one the government’s furlough scheme is coming to an end and two nationwide lockdown restrictions could be on the horizon.”

Mr Fitzgerland noted that the furlough scheme ending will put hundreds of thousands of jobs at risk, and this means less people will be in a position to apply for a mortgage.

On top of that, mortgage holidays are also ending on the weekend.

He said: “This results in less demand, pushing house prices down.

“Payment holidays for things such as mortgages and car finance deals are also coming to an end, putting extra financial pressures on the public.

“We don’t anticipate a huge market correction, but we are already seeing some of the froth coming off what has been a very hot market – one which was never going to be sustainable.

“As demand starts to slow down prices will move much closer to valuations.

“In some cases prices will dip below valuations, especially if those valuations are historic – but we expect the out turn to still be a net increase in overall prices even considering the cooling we are starting to see.

“As is always the case with house purchases and sales if a medium to longer term view is taken values tend to go up – we see that as no different now.”

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Sam Mitchell, CEO of online estate agent Strike is reassured by the Government’s effort to support the economy.

He said: “Encouragingly, despite the threat of furlough ending, it’s clear that the Chancellor is doing what he can to support the economy.

“The latest job retention scheme should ease the worries of some and help maintain momentum in the property market throughout Autumn.

“Plus, to get the benefits of the stamp duty holiday many will need to have offers in hand by early December — which should mean a very busy eight weeks or so to follow.”

So what will happen in 2021? It’s hard to tell according to the experts.

Mr Mitchell said: “It’s hard to say what will come in the new year with so many factors at play.

“However, the Government has proven this year that it will do whatever it takes to support the property market.

“Their sights are firmly set on ‘Generation Buy’ as the next incentive to keep property demand high, with talk of higher loan-to-value lending for first-time buyers and even rumours of them allowing people use their pensions as a home deposit.”

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