The uncertainty created by Covid-19 and the impact of current lockdown measures is the forefront of conversation across almost every industry. The property market has recently been given the green light to get back to work by the government and home moves are now considered to be reasonable excuses for leaving the house. Naturally, there are many questions and predictions of how the market will react, our article looks at the current market conditions and how well placed the UK market is to weather the storm.
As a nation, Britain is no stranger to uncertainty in recent times. The nation has just broken free from the shackles of Brexit and a subsequent General Election which followed. Now it will be faced with further uncertainty placed upon all aspects of economic and personal life by the current Covid-19 pandemic. The British economy, like all global economies, now faces the repercussions from the cessation of almost all economic activity for the past two months, with only a gradual reopening of the economy now beginning to take place. What effect will this have on the UK property market, Is the market in a position to withstand the pressure of this turbulent period, and how has it coped with similar circumstances in the past?
Initially, 2020 had started with a bang for the UK Property Industry. The resolution of the Brexit saga coupled with Boris Johnson’s landslide election victory was welcomed by almost all within the property industry. Renewed confidence and clarity of the future of the country gave both home buyers and investors the clarity they needed to re-enter the market, many who had been closely observing from the sidelines for the previous three years. Activity across the market had dramatically increased with sales volume rising by 12% in January. House prices in February of this year hit a new record high with an average sale price of £312,625 which represented a 1.0% increase from the previous month.
Just as the market looked to have turned the corner with indications of an upward trajectory it has been hit by the proverbial train that is Covid-19 and all which that entails. So how much of an impact will this have on the property market? The most recent financial crisis of 2008 still lives long in people’s memories, any mention of a downturn understandably strikes fear into the hearts of all property owners and investors. Whilst of course caution is well exercised in a situation like this, a total collapse of the housing market to levels seen in 2008 is not on the cards. The market thankfully finds itself in a robust position to fend off an unexpected short term shock. Whilst lenders are obviously unnerved by the current situation, they are now in a far better position to ride out any pressure that this crisis is able to exert on them. The statistics quoted previously show the market to be in a strong position, the story may have been different had Coronavirus arrived at the same period of 2019 when the existing political landscape was somewhat more uncertain.
Naturally, the practicalities needed at all stages of a property transaction such as viewings, surveys, and actually moving home mean that people for the coming months are likely to be staying put. Lower transactional figures will generally pull on values and prevent any form of upward trajectory. No certain time scale can be put a resolution to the Covid-19 pandemic, however, when this situation is resolved the UK can be thankful that the property market is very well placed to bounce back. A spokesman for Sotheby’s has stated that “Covid-19 won’t lower prices, it’s simply stalled some sales for now. Housing will get more expensive this year eventually. Now is a great time to buy.” The base rate cut from 0.75% to 0.1% will undoubtedly act as a stimulus to house price growth when we come through the other side of the Covid-19 situation.
Whilst homebuyers may be wary of the logistical problems presented by a home move, off-plan property sales are a great option for investors who are not keen to stand still and most developers offer viewings via video link and virtual tours. With completion dates of up to two years away this means that no surveys or physical moving will take place until the back end of this pandemic is reached and placed well behind us.
For more information and guidance on the current market, Meridian is happy to help.