What may happen to the local property market post COVID-19?

I would like to start this blog by saying that this is completely uncharted territory. I have worked...

I would like to start this blog by saying that this is completely uncharted territory. I have worked through financial crashes and recessions but none of us have ever experienced this in our lifetimes. No matter how many models are built trying to predict the effect this will have on the market, we will not know for sure until restrictions are lifted. That much is obvious.

Lets start by looking back to the financial crash in 2008

In the years preceding this crash, big banks were allowing buyers to borrow large sums of money, 4 or 5 times salary, with minimal deposits and very little evidence of income, particularly if you were self employed. in fact, Northern Rock famously lent 110% of a properties value! The ease at which borrowers were being given mortgages, including the buy to let market, led to hugely inflated property prices with double digit increases being seen year on year. It was only a matter of time before the bubble burst and bust it did! Banks suddenly realised they had lent billions of pounds to borrowers who would never be able to repay loans and were suddenly laden with bad debt. Headlines across the world said house prices would go off a cliff and banks were going bust.

House prices dropped, unemployment rose and banks literaly shut up shop and were only lending to those with huge deposits and were very secure in employment. Self employed found it almost impossible to borrow money.

So in short, this was really caused by greed and reckless lending and even if there was a desire to move home, lenders changed their criteria to such an extend that many found themselves unable to borrow the money.

COVID-19 Is So Different

Here’s how prices look over the past year according to Zoopla:

CR5 – Over the past 12 months the average price paid for a property is £530,334. There have been 362 sales meaning prices are up 4.37% (£23,980) on the previous year.

CR8 – Over the past 12 months the average price paid for a property is £537,727. There have been 244 sales meaning prices are up 3.25% (£19,622) on the previous year

Prior to this, from 2016 to late 2018 house price barely rose at all. The market remained steady and lending was still strict and loans were carefully stress tested and decent deposits required.

The Brexit Effect

No matter what your political views on this, Brexit had a negative effect on the market because there was uncertainty and this makes the housing market nervous. Many of my clients put moves on hold until politicians had agreed on a way forward. We reached that point when the Tories won their majority in December 2019 and by early 2020, we had begun to see a surge in activity. In fact all the properties we launched on Boxing Day had sales agreed in early January and so there was a renewed level of energy, with both buyers and sellers keen to get moving.

The COVID-19 Effect

When we were suddenly hit with this and went into lock-down, the first thought was fear, fear of the unknown, our health, the well being of our friends and family and of course, financially. None of us had any experience to go on and that is always going to cause deep concerns and worries.

To be honest, with estate agents and solicitors seemingly unable to operate I thought the market would crash within a few weeks of lock-down! The reality though is very different and although clearly the market is no where near its former levels, there is some activity going on.

We have adapted the way we work and have been able to provide virtual valuations using video, zoom/face time etc. Virtual viewings have taken place and we have offers on properties subject to real-time viewing when restrictions are lifted. Buyers are registering and don’t seem overly concerned, although of course wonder what will happen over the next few weeks and months. In addition, solicitors are still working and lenders are doing ‘desk-top’ valuations where possible and mortgage offers being released. We even had one done by a drone last week! There is a COVID-19 clause which can be inserted into contracts allowing completion to be deferred, if necessary and this is also helping. We are an adaptable species!

The fact is that there is no panic is huge. Putting political beliefs aside, the Government have stepped in very quickly providing businesses with some financial help in the way of loans, furlough scheme etc and local councils have offered grants to many businesses which has been a real life line to many. This means that although many are earning 80% of their salary rather than 100%, the majority will go back to full time, fully paid working and this in my opinion is the big difference.

The need to move doesn’t go away, if you need a larger house you need a larger house and its a case of when not if in most cases, As long as people have some job security and banks continue to lend, then the market will resume and be back to normal.

Many economists and doom mongers are predicting a sharp fall in property prices but as I have said above, if people get back to work and continue to be employed, spend money etc then this is likely to be avoided. Of course if we find ourselves still in lock-down into the Summer then perhaps this may be very different.

Whatever happens, the local property market has always proved resilient and when property prices were falling in 2008 at 10% in London, they were only falling 5% here and had rebounded within a year or so. Unlike London which is still struggling now.

The great thing about this area is that is offers so much for families. There’s an excellent range of schools – both primary and secondary, excellent transport links into London, the M25/M23 network just a short drive away, affordable housing compared to many other areas and some amazing countryside to boot.

I hope you enjoyed reading this blog. As I said at the start, none of us truly know and this is just my thoughts on what may happen and why. If you have any comments or would like to discuss this further, why not give me a call on 020 8763 8060 or drop me an email at hadley@parkandbailey.co.uk