The ongoing coronavirus pandemic in the UK and its subsequent lockdowns and stay-at-home measures are expected to cost the country's housing market and related businesses an estimated £14.3 billion or roughly $17.8 billion in lost revenue. According to Knight Frank, the losses could be much larger if the situation is not immediately placed under control.
As pandemic started to spread across the nation, the UK had imposed a three-week lockdown last month. That has since been extended to three more weeks as the government stepped up its efforts to mitigate the spread of the pandemic. As of Tuesday, the UK had more than 126,000 confirmed cases and over 16,500 deaths.
Knight Frank estimates that the restrictions will likely result in around 526,000 fewer home sales throughout the year. The consultancy firm also estimates that the market will see around 350,000 fewer mortgage approvals. As more and more people lose their jobs or are strapped for cash, the company expects that around £7.9 billion in home renovation spending could be lost.
The company also included the losses expected to be incurred in stamp duties, taxes, and earnings from removal companies in its overall £14.3 billion estimate. The expected losses in the UK's housing market will likely negatively affect the country's economy given that it accounts for about 7 percent of its economic output.
London-based real estate firm Strutt & Parker concurs with Knight Frank's forecast and stated that the industry will see a significant drop in house transactions throughout the year. The company forecasts that home transactions could drop between 25 percent and 40 percent depending on how the government will continue to react to the health and economic crisis.
In its report, Knight Frank stated that the losses will have a wider economic impact as people continue to lose their jobs amid the general mobility restrictions. Last week, the Office for Budget Responsibility (OBR) estimated that the UK's economy could contract by as much as 13 percent this year as a direct result of the shutdowns. The agency added that the economy could go into its deepest recession in over three centuries.
The UK government-funded body stated that the country's economic output could drop by as much as 35 percent in the second quarter. It also expects unemployment rates could more than double to nearly 10 percent amid the crisis. However, the OBR remains optimistic of a rebound later in the year if the government lifts the current restrictions after it controls the spread of the pandemic.
