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Housing market starts to reopen in Scotland as lockdown eases

From Monday 29 June, restrictions on housing moves will be eased in Scotland as part of the easing of its lockdown measures.

This will allow valuations and viewings to take place, and marks the initial stage in the reopening of the Scottish housing market.

This development in Scotland follows a similar move to ease lockdown on 19 June in Wales, which saw the government allow viewings to take place in vacant properties, and to ease restrictions on house moves where a sale has been agreed, but not yet completed.

In England, it has been more than a month since equivalent changes were made on 13 May.

First Minister Nicola Sturgeon, said: “The sacrifices that have been made – and I know how hard and at times painful they have been – have suppressed the virus.

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“They have also protected the NHS, and have undoubtedly saved a significant number of lives.

“They have also brought us to the position where we can now look ahead with a bit more clarity to our path out of lockdown, and I hope details announced today will provide people and businesses with more certainty in their forward planning.

“But let me be clear that each step on this path depends on us continuing to beat the virus back. That is why we must do everything in our power to avoid steps being reversed.

“The central point in all of this is the virus has not – and it will not – go away of its own accord. It will pose a real and significant threat to us for some time to come.

“Maintaining our progress also means all of us abiding by public health guidance.

“Wearing face coverings in enclosed spaces, avoiding crowded places, washing our hands and cleaning surfaces regularly, maintaining physical distancing, agreeing to immediately self-isolate and get a test if we have symptoms – all of these basic protections matter now more than ever as we all get out and about a bit more.”

A statement from the Welsh First Minister, Mark Drakeford MS, said: “This package marks a significant unlocking of the regulations and, for many aspects of daily life in Wales, we are moving into the amber phase of our traffic light system.

“We have been able to do this because of the actions everyone in Wales has taken to date in complying with the stay-at-home and stay local rules.

“We need everyone to continue to take steps to protect themselves and their loved ones as we find a way to live and work alongside coronavirus.

“This means working from home wherever possible, maintaining social distancing and frequent handwashing.

“For some people it may mean wearing a face covering in certain situations, for others it will mean continuing to shield.

“I want to thank everyone for everything they have done so far. Together we can keep Wales safe.”

Mark Hayward, chief executive at NAEA Propertymark and David Cox, chief executive of ARLA Propertymark, said: “It’s great news for consumers and the industry in Scotland that the property market is reopening on Monday.

“Whilst it is not a return to normal, the new guidelines will allow members of the public to view, purchase, rent and move into new properties…reinvigorating the housing market and boosting the economy.

“Of course, safety is paramount, and we encourage all agents to follow the Propertymark guidelines on property viewings and moves closely to protect themselves and others.”

By Jessica Bird

Source: Mortgage Introducer

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Hereford sees a surge in buyer demand as housing market reopens

HEREFORD has been named as the city leading a bounce back in buyer demand following the reopening of England’s housing market, analysis has found.

Property website Rightmove based its findings on the volumes of house hunters phoning and emailing estate agents about properties for sale in the first two weeks of June, compared with before the lockdown in the first two weeks in March.

Across England generally, buyer demand was up by nearly a third (32%).

The housing market in England started to reopen from May 13, with serious buyers now able to undertake physical viewings once more.

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Hereford topped the list, with demand surging by 77% when comparing the first two weeks of March with the same period this month. The average asking price in June, according to RightMove, was £244,440.

It was followed by the North West towns of Wigan, with a 71% uplift and an average asking price of £165,448, and Rochdale, where the average asking price was £179,329, with a 66% increase.

Steven Thomas, Director of Watkins Thomas in Hereford, said: “Our market has been very busy since we were able to reopen in May.

“There’s been a shift in the type of buyer since before lockdown. We were dealing with a lot of first-time buyers with limited deposits in March, but now it’s families looking for more space.

“It’s a bit like what we see in January – families spend Christmas sitting down and talking about their next move and they get going in January. We’re now seeing people, having sat down during lockdown and reviewed what they’re looking for, jumping into action in June.

“June and July is often quieter for us because this group of buyers are usually away, so that’s why we’re seeing a surge of late spring buyers.

“There’s also a lot of real interest coming from the South East, from people in their 50s and 60s realising they can get a lot more for their money and can live in an area with acres of open countryside.”

By James Thomas

Source: Hereford Times

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UK house prices holding up as city folk flock to the country

The number of city-dwellers pursuing their dream of a rural idyll is on the rise. And despite the pandemic, UK house prices are holding up well, says Merryn Somerset Webb.

What do you want right now? Immediate freedom to go to the Italian lakes aside, I bet that near top of your list is a bigger garden. If it isn’t that, it will be a home office or two, or perhaps an intergenerational living annexe – so if lockdown ever comes again you won’t have to go three months without seeing your family.

Whatever is on the list, the odds are you want the house itself to be in the country. In an ideal world your new bigger garden comes with a pool, a tennis court and a teenage bunk house scattered around its many acres.

I don’t want to spend another lockdown in a city (I don’t actually want to spend another day in my city) and around the world, an awful lot of people seem to feel the same. The New York Post reported this week that “frantic” Manhattanites were spilling out of the city into the suburbs, snapping up houses real estate agents had begun to think they would never sell – sometimes sight unseen. Want a five-bedroom colonial style home in Connecticut for $1m? You’d better rush.

You can see the same feeling in the data in the UK. Listings of properties to let in London have surged. Estate agents working within a few hours of London are telling stories of buyers flooding to the countryside, willing to pay almost anything for big houses they wouldn’t mind getting stuck in (Cornwall has gone nuts too). Rightmove reports that searches for houses with gardens were up 42% last month compared with last May.

People who used to care for nothing but kitchen islands and central London postcodes are now obsessing over online photos of raised vegetable beds and croquet lawns. The interest in the market isn’t just anecdotal. Savills saw agreed deals rise 108% on the week last week and exchanges up 53%. Wider market data from TwentyCi shows a 54% increase in the number of properties marked “sold subject to contract” across the market in the past week – and a 99% increase over £1m. If you live in London now and thought that a Surrey Hills house was beyond you before, it almost certainly is now. The rich move fast.

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No real risk of a house price crash

And prices? You’d think that in the wake of a global pandemic you’d already be seeing a bit of a slump. It isn’t necessarily so. Nationwide reported prices down 1.7% in May. That’s a nasty number if you annualise it. But there were so few transactions last month that this number is all but meaningless. Of more interest should be the fact that prices now appear to be more or less flat on where they were a year ago.

So what next? In the short term at least, it seems clear that there is to be a rebalancing of city and non-city prices. What of UK house prices as a whole? Here, things are a little less obvious. House prices are about sentiment, of course. But they are more about the availability and the price of credit and would-be buyers’ incomes.

When prices fall properly it is usually when unemployment rises fast and those who can’t meet their mortgage payments become forced sellers.

Unemployment is likely to rise fast as the furlough scheme comes to an end: ask around and you will hear company after company reluctantly starting redundancy consultations. However, not only could the bounceback be stronger than expected, but a good many households are in considerably better shape than they were pre-lockdown.

Numbers from the Office for National Statistics suggest that the lack of spending opportunities should have allowed the average household to save £182 a week for the past nine weeks, while analysis from Wagestream suggests that 52.5% of those who still have jobs “feel better off than usual.” Demand for payday loans fell 61% in the first three months of this year and in March alone UK consumers paid down a whopping £3.8bn of debt.

Add to this the fact that the banks are keen to not be the baddies in this crisis. They have offered easy access to the mortgage holidays mandated by the government, taken up so far by 1.8 million people, says UK Finance. It’s a reasonably safe bet that they will be firmly encouraged to show exceptional forbearance to those who can’t pay in full when the holiday period is up, too.

At the same time, while rates on very high loan-to-value mortgages have crept up a tiny bit – and some lenders have pulled out of this part of the market – rates overall are low and likely to stay low for now (at some point the levels of stimulus we are seeing will cause inflation, but not quite yet). This week Skipton Building Society reintroduced 85% loan-to-value mortgages and cut rates on lots of products. How does a five-year fix at 1.35% sound to you? Sounds good to me. Skipton is also accepting mortgage applications from furloughed workers, which has to help.

We might also see new government schemes put in place to support prices (there’s a scheme for everything else). This is not the kind of environment in which forced sellers cause a crash.

But prices have become more affordable

The final point to note is that UK house prices aren’t as stupidly expensive as usual at the moment. They have been fairly flat in real terms for a couple of years now and have gradually become more affordable as a result. Those who think that this crisis will spell the end for prime London property (a mistake I often make) might also note that by the end of last year prime central London prices were already down more than 20% from their 2016-2017 peak. That’s not a place collapses usually begin from. They might also note that while 2020 is not 2008, prime central London prices rose an astounding 26% between March 2009 and January 2010.

You will think from all this that I am predicting rising house prices. Buy, buy, buy! I’m absolutely not (that would be out of character, for starters) and nor is anyone else. Savills sees prices down at least 5% this year and Capital Economics sees them down 4%.

There are lots of brakes on this market. The pent-up demand that is running our poor country agents off their feet will slow. The implosion of the buy-to-let sector will bump up supply. There may well be wealth taxes on the way (any liability added to a house cuts its value) and if inflation does kick off, interest rates will have to rise.

My best guess (and my hope) is that house prices will stay flattish in nominal terms and perhaps fall in real terms, a situation that will suit almost everyone. My only worry? That I am on the wrong side of the city-country trade.

By Merryn Somerset Webb

Source: Money Week

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Reopening of housing market ‘not so smooth but welcome’, says Wellington estate agent

The reopening of the property market is a ‘truly wonderfully cautious first important step in the right direction’, a Shropshire estate agent has said.

Dean Millington, business proprietor of Harwood The Estate Agents, Wellington, said the Government’s green light for agents to return to work had been akin to ‘dropping the bombshell onto the property world’.

“Nothing like a little advance notice whilst also forgetting to mention the finer details to the public and the agents,” said Mr Millington.

“They have since released the really important reality about viewing restrictions, guidelines and practices agents must implement and put into practice sharpish before being able to commence safely.

“The Government and the National Association of Estate Agents have now given strict guidelines on how things are to be handled and the safety measures that should be implemented.

“I have noticed that the media language is now a little less gunhoe and more subtle, such as ‘the property market has been released from some elements of the lockdown’.

“I believe it truly would have been all round a more common sense approach to have distributed the guidelines of the return to agents in advance, then made a more timely announcement of a forwarding date to enable agents to fully prepare correctly and safely.

“That all said, it truly is a wonderfully cautious first important step in the right direction, although the property world has been slightly thrown into a little turmoil.”

He added: “I have been in live webinars, client calls, emails, texts and a constantly non-stop avalanche of communications since the announcement explaining the finer details and I am pleased to say we are now ready.

“At the end of the day we truly wholeheartedly support the Government in their amazing efforts during these incredibly testing times and will continue to play our small part in ensuring the safety of our clients, staff and the public.

“We are so proud and in awe of all the key workers and our NHS and we pray, hope and plan for brighter days ahead.

“We must keep faith, things will always get better – and they will.”

By Lisa O’Brien

Source: Shropshire Star

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House Prices Set For Short-Term Hit

Coronavirus-hit buyer confidence will translate into short term house price falls of between 5 and 10 per cent, said researchers at international property agents Savills.

But such a drop would be smaller than the price falls experienced in the early 1990s recession or in the Global Financial Crisis, suggested authors of the firm’s May UK Housing Market Update, Ed Hampton and Chris Buckle.

The pace of recovery in prices after the initial falls will depend on the state of the wider economy, although the signs are not too encouraging. The May forecast from Oxford Economics anticipates the UK’s Gross Domestic Product 0.7 per cent lower by the end of 2024 than it expected in April, says the Update. ‘This will have a knock-on effect on household incomes’.

On the plus side, interest rates are also now expected to be lower for longer. ‘Our November forecast for 15 per cent UK house price growth over the five years to 2024 included an assumption that the Bank of England base rate would rise to 2 per cent by the end of that period. Oxford Economics’ current forecast is for it to be 1 per cent’, say Hampton and Buckle.

‘The trade-off between borrowing costs and income rises will determine the medium term outlook for house prices, once the initial crisis has passed’.

But at least the market is moving again. And ‘short term activity will be supported by a degree of pent up demand and some buyers may now have a greater inclination to move following lockdown. There is now particular emphasis on moving for more space, and to the countryside.

It is also possible that the new homes market may recover faster, due to it being easier to perform virtual and socially distanced viewings in new build homes.

‘While this bodes well for an increase in activity, it is starting from the exceptionally low levels observed during lockdown. Data from the main property search portals suggests that sales agreed and new listings were at around 10 to 20 per cent of the levels seen immediately before the lockdown, although buyer browsing levels have been higher’.

Low activity levels are also reflected in mortgage lending data. New mortgage approvals fell to their lowest level in March since early 2013. The drop was particularly sharp as it followed an exceptionally strong February, which had been the strongest month since early 2014, said Savills.

Source: Residential Landlord

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Uneven rise in rental stock as housing market restarts

The number of rental properties reaching the market has increased 5 per cent on average since the government announced the restart of the housing market last week but not all areas have fared the same, according to property management platform Howsy.

The platform analysed the number of available rental properties listed on Rightmove and Zoopla on May 13, when renters and buyers in England could resume moving home.

It found a 5 per cent growth on average in the number of properties available to tenants across 23 major UK cities, when compared to the number of properties listed on April 1.

While the increase was prominent in seven cities, including Edinburgh, Oxford and London, other places saw stocks decline.

The largest rise, based on the number of properties, was in London where an extra 6,838 rental properties were listed by May 13, rising 15 per cent from April 1.

Meanwhile, the largest percentage change was in Edinburgh, despite the property market in Scotland remaining effectively closed.

Callum Brannan, founder and CEO of Howsy, said: “Many in the rental sector will be breathing a sigh of relief with such immediate green shoots of market activity returning to a number of cities following an ease in lockdown market restrictions.

“Of course, other pockets of the market will take longer to see this positive trend emerge as agents and landlords find their feet operationally.”

Kat Tymon, director at Mansfield Money, said the buy-to-let mortgage market was also bouncing back during the coronavirus due to LTV requirements being lower than for residential mortgages.

She said: “Lenders have quickly re-entered this market to make the most of the opportunities out there.

“Demand for renting will still be high as people who previously wished to buy may no longer be able to do so due to lower income or lack of savings due to Covid-19.”

Separately, research by rental deposit replacement scheme Ome found the buy-to-let market declined 1 per cent every year in the past five years.

The latest data from UK Finance found a total of 640 buy-to-let mortgaged properties were repossessed in Q1 2020, marking an 8 per cent rise on the same quarter last year.

Earlier this month Citizens Advice warned that 2.6m private renters were at risk of eviction and possible homelessness when the government’s stay on evictions of residential tenants is expected to end on June 25.

By Chloe Cheung

Source: FT Adviser

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UK house prices jumped before coronavirus lockdown brought market to standstill

UK house prices jumped in March before the coronavirus lockdown brought the housing market to a standstill.

The average UK house price increased 2.1 per cent in the year to March, up from two per cent in February.

London house prices soared 4.7 per cent, the largest 12-month growth recorded in the capital since December 2016, according to the latest data from the Office for National Statistics.

In England house prices were up 2.2 per cent to £248,000 and increased 1.1 per cent in Wales to £162,000.

Scottish house prices increased 1.5 per cent and in Northern Ireland the average house price jumped 3. 8 per cent.

The ONS house price index is based on completed housing transactions, reflecting deals that occurred before the government imposed measures to reduce the spread of coronavirus.

The coronavirus lockdown introduced on 23 March brought the UK housing market to a standstill, with experts predicting a sharp drop in house prices this year.

However, estate agents and housebuilding firms have started to reopen as lockdown restrictions have been relaxed.

Pent-up demand

Some estate agents have reported a release of pent-up demand as restrictions have eased, resulting in a sharp uptick in enquiries.

Lucy Pendleton, property expert at estate agents James Pendleton, said: “Enquiry levels are off the chart at the moment and we are gradually bringing back more staff. Those who have already returned from being furloughed have been using words like ‘frantic’, which is a great sign.

“Only time will tell how we can convert those enquiries and how that translates into all-important prices for vendors.”

“The strong growth seen at the start of the year and annually has provided a strong foundation on which the market can bounce back and fears of a market crash should now move to the back of our minds,” Marc von Grundherr, director at Benham and Reeves, said. “Although, only time will tell, of course.”

However, other experts suggested the recovery for transaction numbers and UK house prices could be slower.

“Looking ahead, Covid-19 has re-introduced considerable uncertainty into the economy,” PwC economist Jamie Durham said.

“Although the Government has now lifted most of the restrictions on the housing market, we would expect the market, and in particular transactions, to remain subdued over the coming months.”

London to lead bounce back

“It’s significant that London was clearly powering ahead in March as the pandemic tightened its grip, with annual growth higher than at any point in the past three years,” Pendleton added.

“That tells you all you need to know about how prices should weather this storm, particularly in the capital which tends to inform what happens elsewhere in the country, albeit with a bit of a lag.”

By Jessica Clark

Source: City AM

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Alternative ways to revitalise the housing market

It’s still too early to know how hard the housing market will be hit by the COVID-19 crisis, and if a recovery is needed, just how long that might take.

Whilst stamp duty reform could undoubtedly play a part in helping an ailing housing market to recover (a subject I’ve blogged about previously), it’s not the only trick up the government’s sleeve. Some are already planned, but others should also be considered.

Permitted Development Rights (PDR)

Shortly after the budget announcement in March, Housing Secretary Robert Jenrick announced that the government would be bringing forward a series of enhancements to the PDR regime.

A key change will be to allow ‘upwards extensions’ of up to two additional storeys on existing buildings (subject to compliance with building regulations); this will enable a sizeable number of building projects to get underway without having to navigate the often lengthy planning permission process.

Consultation will also begin on a ‘new build’ PDR category, which would allow the demolition of vacant commercial, industrial and residential blocks, to be replaced with new residential units.

This new option could make much more commercial sense for developers on two key fronts. First, the uncertainty and delays associated with seeking permission to convert these buildings to residential units will no longer be there – although the approval process around building design has yet to be clarified.

Second, the demolition and rebuild of buildings is likely to result in a more efficient design than might have been achieved by a conversion – in terms of the use of space, positioning of exits, windows and corridors etc.

Business rates

Such an expansion to PDR might not necessarily be appropriate for high streets, however, which are likely to be casualties of the crisis.

The demolition and replacement of retail units here would fundamentally change the high street and could herald subsequent closures of other businesses which had otherwise survived the crisis.

Different measures are required to revive vacant retail units on the High Street, the most obvious of which is business rate reform.

Minor changes could involve a lengthy rate-free period for new businesses, followed by a period over which the full level of rates is phased in.

In the meantime, existing businesses will need to see the current freeze on business rate payments continue for a significant period.

The stark impact of the COVID-19 crisis on the high street and the demand for office space should be enough to prompt a full-scale consultation on business rates – including a review of the calculation basis (currently achieved by multiplying the property’s rental value by a multiplier), and consideration of whether they should be completely replaced.

Business leaders have long complained about how high rates in expensive areas subsidise lower rates in areas where rental values are lower.

Such reform would also be welcomed by those who pay business rates on office space. These fixed-term liabilities are a burden that drive operational costs higher, and if the economy falters we may start to see demand for office space reduce as businesses struggle to pay their fixed costs.

If business rates were reduced on office space, or at least re-assessed on a fairer basis, demand could actually increase, which would provide impetus for more construction in this area.

Planning Permission

The government also announced plans to bring forward other changes to the planning regime, including investment to encourage greater building in brownfield areas, and greater support for community and self-build housing.

A key part of the announcement was that a review of the Planning Permission system would be undertaken to modernise the process, and speed up approvals.

Policy Exchange, the UK’s leading thinktank, published a 77-page report at the end of January with some sweeping modernisation recommendations including the introduction of a binary, zonal land use planning system – where land designated as a development zone would always carry a presumption in favour of new development.

They also recommended that market forces, and not local planning authorities, should determine what can be built within these zones.

It is worth noting, however, that planning permission reform has been promised by many previous governments. Unless sweeping changes such as those suggested by Policy Exchange are implemented, local authorities will continue to have the final say on all housing development proposals.

VAT breaks, temporary VAT reductions or holiday

The VAT domestic reverse charge, which makes changes to the way that the construction industry will have to handle and pay VAT, was due to be implemented last year but will now be implemented in October 2020.

In short, the new scheme means that those supplying construction services to a VAT-registered customer will no longer have to account for the VAT themselves. Instead, the customer will account for the VAT as if they’ve made the supply to themselves.

The domestic reverse charge will be a change the industry needs to accommodate, but it won’t assist with any market recovery. A temporary reduction in the rate of VAT for construction-related services and supplies, or a delay to the date for VAT bills to be paid, could significantly help ease cashflow concerns, however.

Help to Buy

Further improvements could be made to the Help to Buy scheme. This has already been extended from 2021 to 2023, the extended scheme will be limited to first-time buyers purchasing new-build houses, and regional price caps will be implemented.

Whilst the continued inclusion of new-build homes is a boon for the construction industry, the deposit requirement of 5% could be lowered to help those who have had to eat into their savings in order to survive the current crisis. The interest-free element could also be temporarily extended to perhaps 25% (50% in London).

Social housing

Another way the government could feed capital into the construction industry directly would be to provide additional funding for the building of social housing.

The government has recently reaffirmed its commitment to major infrastructure projects such as HS2, and a commitment to additional funding for social housing would both support the construction industry, and help them meet their own house building targets where otherwise they may now be missed.

There are, undoubtedly, a number of other initiatives that could be introduced. We won’t know which ones are appropriate, or should be prioritised, until we have a better idea of just how much the construction industry has been impacted.

By Richard Payne

Source: Mortgage Introducer

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Potential spend of London house buyers pushed to £52bn

The total potential spend for all residential buyers registered with Knight Frank in London was £52bn as of 5 May, according to the real estate consultancy.

That compares to £43.5bn on the same day in 2019, representing a 20% increase.

The data also shows that the number of lost sales in London due to Coronavirus is increasing. While four in five deals underway when the pandemic struck are still progressing, transaction numbers in the week ending 2 May were 54% below their five-year average.

However, a secondary trend is that more buyers are starting to prepare for life after the lockdown. The equivalent drop in exchanges in the first week of lockdown (week ending 28 March) was 74%.

The same pattern is also visible when examining the number of new buyers registering. In the week ending 28 March, the number was 77% below the five-year average in London.

By the week ending 2 May, that had narrowed to a decline of 60%. The number of new prospective buyers has doubled over this period.

Meanwhile, the number of web hits for sales properties in London was 12% below the five-year average in the week ending 2 May. That compares to a 42% decline in the first week of lockdown.

Furthermore, while the number of new buyers registering was down 60% in the week ending 2 May, the number of new properties placed on the market was down by 74%. In the four-week period to 2 May, supply fell by more than demand each week, a trend that will act as a brake on price declines.

Tom Bill, head of London residential research at Knight Frank, said: “That said, the difference between asking prices and exchange prices is widening.

“In April 2020, the average sale price was 94% of the original asking price, down from 97% in January, which was a time when the effects of the so-called Boris bounce started to take hold.

“This reflects the ad hoc renegotiations that are taking place between buyers and sellers, which are not based on comparable evidence.”

Knight Frank’s prime central and outer indices for April are broadly flat over the past 12 months, reflecting how thin trading conditions remain.

The index in prime central London fell 0.3% between March and April, leaving the annual decline at 1.3%. It was the first time the annual decline had widened in more than a year.

This pattern reflects what the sales evidence is showing. The average £PSF in April 2020 was £1,054, marginally down from a figure of £1,057 in April 2019.

Source: Mortgage Introducer

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Is Covid-19 really impacting demand for property?

Alpa Bhakta, CEO of Butterfield Mortgages, looks at the prime central London property market where transactions made a strong start to the year but that has now changed. It’s difficult to predict the future but Alpa remains positive.

When Covid-19 lockdown measures were first introduced in March, businesses large and small were forced to change the way they operated, the services they provided and the manner in which they engaged with clients.

Now, over a month since these lockdown measures were first introduced, it seems as though organisations have, for the most part, adapted to this new climate.

For real estate, social distancing regulations have forced construction sites to temporarily close, compelled sellers to take their property off the market and brought the majority of existing transactions to a standstill.

House prices

Should the UK remain in a state of lockdown for the coming months, there are fears that the rate of house price growth could drop significantly. Cebr recently announced that house prices in the UK will fall by 13% by the end of 2020 as a consequence of Covid-19.

Of course, there is a natural propensity for forecasts to take into account worst case scenarios. We received similar projections in the lead-up to the 2016 EU referendum. One month before the vote took place, HMRC warned that house prices would drop by at least 10% should the UK vote for Brexit, and as much as 20% two years following the vote.

Evidently, this proved not to be the case, showing why we should be critical when assessing how certain future events will affect demand for real estate. This is also true when we consider how different sectors of the market are performing, like prime central London (PCL) property.

Strong start to 2020

The PCL market was in a strong position at the beginning of 2020. Knight Frank recorded more transactions in prime central London property in the two weeks following the election than it had witnessed since December 2016. As a result, it anticipated a significant rise in PCL transaction activity over the course of 2020.

Covid-19 has now brought many of these early projections into question. Transactional activity has slowed, but this is not due to a lack of demand.

In reality, prospective buyers are simply not in a position to act on their investment intentions due to the obstacles posed by the pandemic. In this sense, the rate of PCL house price growth is likely to slow, as should be expected given the current circumstances.

The question, and bigger fear, is whether Covid-19 will have a long-lasting impact on demand for real estate. Will investors be deterred from UK real estate or will they simply continue to act with the same enthusiasm displayed at the beginning of the year?

Optimistic future

There is good reason to be optimistic about the future. If Brexit has taught us anything, investors will only act confidently once certainty has returned to the market. Boris Johnson’s victory in the 2019 general election was this breakthrough moment previously, and I am confident a similar event will trigger a second surge of investment activity across the wider property market.

This view is shared by global real estate provider Savills. Having reviewed its five-year projections, it remains confident that average UK property prices will increase 15% by 2024 even with the uncertainty surrounding Covid-19. This is an impressive rate of growth, even if it reflects residential real estate instead of just PCL market.

The situation regarding Covid-19 is constantly changing and there is still no indication of when the current lockdown measures will be lifted.

At this moment, it is difficult to make any bold predictions about the future, but we should not let negative speculations overshadow the positive performance the PCL market displayed at the beginning of the year.

Once Covid-19 has been contained and lockdown measures rolled back, I anticipate an increase in property transactions taking place.

Source: Mortgage Finance Gazette