The welcome news that the housing market was to reopen came on 13th May, as the government announced the first steps towards easing the lockdown’s practical restraints. What has happened since and what are the predictions for the next few months?
As many would have predicted, the reopening of the housing market in mid-May saw a surge of pent-up demand returning, with an 88% increase compared to the start of March. Additionally, with lockdown hitting the housing market at its busiest point in the year and around 373,000 sales having stalled as a result, the resumption could see an abnormal number of completions for one period, although whether or not all of them make it through the pipeline remains to be seen.
However, experts at Zoopla have warned that this is likely to be a temporary spike, with levels expected to steady over the coming weeks. Nonetheless, Local Surveyors Direct has reported a rise in activity across its sites in the fortnight since the market reopened, suggesting that there is still high intent to progress sales.
Some property professionals have claimed that the government furlough scheme is hindering businesses within the industry and have called upon the Chancellor to review the scheme, citing that a lack of resources at one point in a housing chain can be enough to cause disruption to all associated buyers’ and sellers’ transactions. The Home Buying and Selling Group goes on to note that greater flexibility within the scheme would enable employers within different services across the industry to react according to demand and facilitate smoother transactions during temporary peaks.
Savills predicts house price values to come under downward pressure as a result of the furlough scheme extension, whilst Zoopla highlights the possibility that buyers in the middle of sales pre-lockdown may also attempt to renegotiate deals. With many homeowners and would-be buyers or sellers now on furlough leave, the full extent to which this impacts the residential market is still to come. However, the news as of 29th May that the furlough scheme would allow employers to bring employees back on a part-time basis from July may bring relief for both professionals and consumers alike, with greater certainty around household incomes and the ability for property services to operate at greater capacity.
A 50-day market lockdown period will bring unforeseen changes that may well go against seasonal property trends and current forecasts, with more consumers having had a significant chunk of time to consider or reconsider their needs and options for moving. For some households, this could be re-evaluating their location as the recent absence of commuting time and increased possibilities around remote working could influence where people want to live and spend time. This undoubtedly raises questions for developers and investors in terms of the future value of residential developments within the London commuter belt and potentially even office developments in central areas.
As highlighted above, it’s still too early to know the full impact that COVID-19 and the lockdown period has had on the UK housing market, as the full economic impact will not be realised for some months, where employment figures and household incomes continue to fluctuate.
Other key considerations that are yet to be fully revealed include the availability of finance going forward, particularly in terms of high loan to value mortgages (LTV) for first-time buyers. Many lenders withdrew 90% or higher LTV products as they faced an influx of mortgage holiday application when the extent of the pandemic unravelled.
The London Residential conference will take place on Tuesday 16th – Thursday 18th June, where we will be joined by experts to discuss the impact of COVID-19 on the residential market. Click here to book your ticket.