The worldwide covid-19 pandemic has had a great effect on all of our lives. In the UK, the lockdown period meant offices, factories and retail outlets were forced to shut down for many weeks. With social distancing enforced and a ban on leaving the home for anything other than essential journeys, the property market has been greatly affected.
Below we will talk about what happened during lockdown, and what the situation is now with regard to the property market in the UK. We will also look at what is likely to happen in the near future, and any effect the crisis may have had on house prices.
The Effect of Lockdown
The announcement in the House of Commons on 16th March 2020 began the lockdown process in the UK. From then on, the population were instructed to avoid any unnecessary contact with others from outside their household, and other restrictions were introduced. Non-essential retail outlets were forced to close, as were pubs and restaurants, and estate agents too.
With viewings effectively becoming impossible, the entire housing market came to a standstill. Work stopped on new developments, renovations and all construction except for essential projects. The sudden stoppage of the housing industry would have notable effect on what happened during the lockdown period.
People with homes for sale found they were in an enforced period of limbo. Some creative agents started offering video tours – a sensible idea and one that has plenty of scope for future use – yet it’s clear that no buyer was going to make a decision without physically viewing the property.
Another problem was that of finding a removal company during the lockdown period. If a move had been arranged for a date within the period, strictly it would have to be cancelled as removals companies were not permitted to operate under lockdown. This led to some awkward and troubling – let alone expensive – delays for movers, and would also have knock-on effects for other sales.
The buyer’s perspective also changed: with the breadwinner in many families furloughed and the future uncertain, those who had been considering selling and trading up put plans on hold. It’s not possible to commit to a house purchase with a future potentially very different to the immediate past. There is no doubt that many sales thus fell through, which again has an effect on the future of the housing market. Perhaps the biggest problem for the industry came when the mortgage companies started pulling their products.
The mortgage companies, perhaps remembering crises of old, started pulling many of their available products from the market a short time into the lockdown period. They did not cease operating but would only consider lending to those buyers with large deposits. In particular, the deposit to price ratio became a deciding factor.
In many ways this was understandable, as a great proportion of the UK working population was now out of working and existing on reduced income – for the foreseeable future and with no indication of a date when normal service may resume. Furthermore, in the lockdown phase the mortgage companies also sent many people home, with the effect that they could no longer handle even the reduced numbers of clients. The removal of many available mortgages helped keep the numbers down and manageable for those who were still operating.
Lockdown is Lifted
When the government began to lift the lockdown measures it was a case of light at the end of the tunnel for the housing industry – and indeed for retail and industry – as although things were no longer as strict, there remained (and still do) certain rules that had to be followed.
For example, open house viewings are still not permitted – for obvious reasons – and agents are not allowed to drive viewers to properties for a viewing. Viewings can be undertaken, although agents are advised to offer a virtual viewing in the first instance and viewings will be subject to social distancing rules. In fact, government advice remains that viewings should only be undertaken by those who are close to putting in an offer.
Removal companies are back in action but again with social distancing observed, and the client is advised to take on as much as possible in terms of packing and preparation in order to limit unnecessary contact with others. The mortgage industry is also back in action and many lenders have reinstated their products in full, with options for those with smaller deposits now available once more.
However, it should be noted that there is still an air of uncertainty in the property industry. Talk of a ‘second wave’ and another lockdown as result is ongoing – some local lockdowns have been implemented in the likes of Leicester and the Greater Manchester areas, for example – and what we know as ‘normal’ is a long way in the future. How has the crisis affected house prices?
The Effect on Property Prices
How will the crisis affect property prices? It’s not possible to say for sure but the expectation is that they will fall. The government usually follows house prices with a tracker and publishes the results, but this was put on hold when the market stood still during lockdown. Lenders have recorded a fall in prices in the month of May when compared to April, but the property search engine RightMove has been seeing increased usage – to record levels – towards the end of May.
Is this a sign that people are looking to move? Bearing in mind that many families have been spending much more time in their homes together than they normally would – schools have been closed for some months now – it could be that many have realised they need more space, either indoors or out.
The future is not clear in either the property market or when it comes to covid-19. What we can say is that at the time of writing things appear to be moving steadily, with sales and moves coming back into the picture, and it is worth keeping an eye on the government advice regards restrictions in the coming months.