From the first, seemingly distant, reports of the coronavirus outbreak in Wuhan, China in late December 2019, to the current, strange and harrowing situation we find ourselves in now, it’s become clear that world has changed forever.
At the time of writing, over 100,000 people around the world have died of COVID-19, and millions more are living in a state of lockdown. Restricted to their homes as part of a social-distancing programme that’s been designed to slow the spread of the virus to avoid overwhelming already strained healthcare systems.
Everyday life has been put on hold for the foreseeable future. In the UK, schools are closed and most businesses are shuttered. There isn’t a single facet of life that hasn’t been affected by the virus.
However, at some point, the lockdown will end, social distancing may be eased or lifted entirely. And once we’ve finished hugging each other, there will be a lot of work to do to right the ship and get us back on course.
And while it may seem trivial in the face of such a vast, often terrifying, event, it’s important to carry on. For us, that means scrutinising the property market, discussing what has happened, what is happening and, if possible, thinking about what will happen.
STATE OF PLAY
Following the Conservative victory in the December 2019 election (which feels like an extremely long time ago), the UK and London property markets were enjoying a wave of optimism. The Evening Standard reported that developers broke ground at 5,275 new home sites in the last quarter of 2019, up 12 per cent on the previous three months. Sales rose by a fifth to 5,684, the highest since the first quarter of 2018, while completions were up at 6,153.
In the first quarter or 2020, it’s a very different story. In one of the first major pieces of analysis of the property market in the age of coronavirus, consultancy Knight Frank predicts the number of house sales in the UK could fall from 1,175,000 last year to just 734,000 this year.
These are shocking numbers, and will have severe ramifications not just for buyers and sellers, but all aspects of the business, from agencies to removal firms. But this is also being described as a ‘deep freeze’ rather than a collapse.
Knight Frank forecast that mainstream UK house prices could fall 3% in 2020, but then bounce back by 5% in 2021 as the market springs back to life and there is a rush of sales and purchases and people reignite their lives.
The figures in the report are based on the assumptions that the UK will be in full lockdown until May, with restrictions being eased in June. This is by no means guaranteed, but if the country does follow this route, the report predicts the London property market could even see an upswing of 6% in 2021.
Data from RICS (Royal Institute of Chartered Surveyors) also points to ongoing disruption in the property market. In a survey from March, participants reported a drop in enquiries across all parts of the UK, with 69% more respondents reporting a fall – down from 19% reporting a rise in February.
Simon Rubinsohn, RICS Chief Economist, said of the survey, “the results of the latest RICS survey capture the period during which the economy moved into lockdown so show a somewhat mixed picture. But critically, the key forward looking indicators clearly reflect the emergency measures in place. The fact that responses are negative not just at the three but also the twelve-month time horizon is significant in suggesting that the legacy of covid-19 could be such that any return to what might be described as ‘normality’ in the economy will take time and households will remain cautious for a while.”
LOOKING TO THE FUTURE
With sweeping redundancies and companies furloughing (another word many people didn’t know before March 2020) large numbers of staff, people’s individual finances and the wider economy are a close second on the list of things to be concerned about. In the rental market, both renters and landlords have been rightfully concerned about what will happen if they struggle financially either due to illness or loss of work.
In March, as part of a range of emergency legislation designed to assist multiple aspects of society, Chancellor of the Exchequer, Rishi Sunak, announced measures to protect renters affected by coronavirus. With these in force, no renter in either social or private accommodation can be forced out of their home. From 26 March 2020 landlords must give all renters 3 months’ notice. While landlords have been offered a 3-month mortgage payment holiday where they have a Buy-to-Let mortgages. Thousands of homeowners are also applying for mortgage holidays from their providers, too.
When restrictions are lifted, and the world re-emerges, a lot will have changed and there will be a lot to do. And like so many areas of life, the property market may need assistance from the government until consumer confidence returns and sales begin again in earnest. Hew Edgar, RICS Head of Government Relations said recently, “while the UK’s health is the priority, our survey feedback suggests that the Government will need to start considering medium and long-term measures that could assist a post-pandemic housing market. These are exceptional circumstances and the Government will need to consider all avenues that could feasibly rebuild confidence, bridging the gap between uncertainty and recovery.”
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