The UK Housing Market 10 Weeks into Lockdownfjpinvestment
With the UK housing market reopening across the country, buyers, sellers and those looking to re-mortgage will be closely watching what happens over the coming months when it comes to the value of property.
With the Government opening the market, guidelines have been introduced to ensure social distancing measures are followed, and as expected, the market saw a surge in activity.
According to property website Zoopla, demand from buyers shot up by roughly 88 percent in the days following the market reopening. Much like we had seen for a year or so before the lockdown, activity is at its greatest in Manchester, Newcastle and Liverpool, typically those areas up North.
With deals on hold from before lockdown measures were introduced now going through, activity in the market has exceeded that of pre-lockdown levels, which saw activity at its highest levels in over a year.
We will only truly know the health of the property market in a few months’ time, once this ‘pressure’ of new deals goes through, but however you look at it, the result is positive.
Prices are expected to drop
Whichever way you look at it, the economic impact of the lockdown has had an impact on all markets, the property market included. It is expected that this rise will be temporary, with a subsiding expected in the coming weeks. No one can say for sure what the fall in house prices will be, or if we will even see a decrease at all.
Predictions from several experts have ranged significantly. Taking some of the prominent predictions, Savills predict a small drop of 5 percent over the coming 12 months, whilst The Centre for Economics and Business Research warns of a bullish drop of about 13 percent.
Whatever the result, the consensus is a fall in house prices over the coming months. This is of course good news on face value for buyers, they have an opportunity to secure a better deal on new property. The concern however is that a drop that is too sharp will result in sellers ‘holding’ their property until prices increase again, resulting in a drying up of property on the market.
The furlough knock-on effect on the UK housing market
The UK housing market is well known for being stable, particularly when comparing house prices across other European countries. Demand has typically superseded demand, causing house prices on the most part to grow steadily. You would expect to see much of the same in the future, but the unprecedented nature of the lockdown may have further damaging effects to the housing market, largely surrounding furlough.
To clarify, surveyors and conveyancers, most notably, are beginning to receive a surge in new business as a result of the property market reopening, but with so many of the company’s workforce on furlough, they cannot meet the demand.
With the market predicted to fall in activity after this initial surge in a few weeks, taking the necessary workforce off furlough will be costly to the business. A revision to allow a more flexible furloughing approach to exceptional businesses is being called for to help survival whilst preventing a bottleneck should the companies not reopen.
Surveyors and conveyancers are necessary in the buying and selling process, if revisions are not made to the furloughing scheme, there will be a hold up in the market, deals will take longer to complete which could cause the market to stall in progress.
What’s the long-term outlook of the UK housing market?
The Royal Institute of Charted Surveyors (RICS) have throughout the pandemic remained positive over the long-term health of the UK property market, with a return to pre-pandemic prices to be realised in about 9 months’ time. This view is supported by the wider community of mortgage brokers, with over half predicting a return to normality in as short as 6 months’ time.
The UK property market is facing some serious challenges, the effect of lockdown will be evident for months to come. Whilst the property market is not as prone to the wider economic challenges as other markets, it is not completely shielded. With 8 million workers still furloughed, many simply will not have the money to move home now, excluding of course those that need to downsize.
A case for positivity
The important thing is to remain optimistic over the long-term health of the economy, however. Many compare this to the 2008 financial crisis, but they are very different. The 2008 financial crash was the result of economic neglect, very different to the protection of peoples lives evident with the lockdown.
The property market was at its strongest consistent rate that we had seen for years before the lockdown happened, and optimists are justified in hoping that the same level of activity will return. A decision to move to a new house is often considered over a long duration, many will still be looking to move home. Many may even realise the current limitations of their property having been stuck inside it for a couple of months, creating additional demand for housing.
Assuming most businesses can operate again as lockdown measures are eased, many will have customers eager to return to use their product or service. With a return to some normality within the wider economy, activity and confidence in the housing market should return.
Advice for buyers and sellers in the market
For sellers, whether a sale has fallen through or you simply want to sell your home, the first piece of advice is to remain realistic with you pricing. Get an idea of what your house is worth with a re-evaluation that is in line with current sale prices.
Be careful when selecting your conveyancer, ensure you are working with a company that have the necessary personnel to handle the sale. Now is a good time to sell with activity increased in the market.
Buyers should be looking to maximise the deposit they can receive. Stretching to the next level of mortgage deals will allow you a buffer protecting you from short term negative equity. As well as choosing a good conveyancer and surveyor, use a mortgage broker to secure the best mortgage deal available.
With interest rates currently at such a low level, mortgage deals are naturally attractive now. When combined with a mortgage broker to secure you the best long-term deal, suited to your needs, this will be hugely beneficial. Buyers are likely to see some good deals come up in the coming weeks, well worth keeping an eye out.