The Sun, along with many other newspapers, reported that “We are headed for the worst house sales slump in 20 years in EVERY part of the UK!” on their front page. That wasn’t this week, last week or even last month but in January 2019. The slump failed to materialise.
During this crisis, the British public have shown a mature attitude in their response to coronavirus and in judging what has been stated on our televisions and in our papers.
We are now seeing the press report doom and gloom in our housing market with the Express reporting that prices are set to plummet by as much as 30% and that buyers will be seeking discounts of 20%. The Mail reported on the first day of the reopening of the housing market that “desperate sellers are dropping the prices of their homes after a glut of properties flooded onto websites”. Are the press right - is a crash really going to happen and will buyers be able to secure cheaper properties?
The General Election result removed the high level of political uncertainty that had existed during 2019 and set the UK on a clear course. This result had started to create greater confidence amongst potential house movers in Q1 of 2020 with a recovery from low price growth and declining activity being seen in March. The Nationwide reported the strongest performance in the housing market since 2016.
Although we all hoped that the virus wouldn’t affect us here in the UK and that it would be contained in the southern European nations, the Prime Minister’s announcement on 23rd March that we would have to enter a lockdown brutally confirmed that this wasn’t going to be the case. In effect, the housing market was put on hold with almost 450,000 property sales left in the pipeline. Unsurprisingly, new listings in April were 90% less than in the same month in 2019 and 87% of estate agents reported a drop in enquiries from potential purchasers and these statistics have led to headlines such as “Property sales have fallen off a cliff”.
But what has happened since the reopening of estate agents? Well, as some predicted, there has been a frenzy of activity. Rightmove saw a 61% increase in online viewings with registrations for properties worth less than £500,000 actually being 1% higher year on year. According to the Money Market, searches for mortgage deals are up 18%. The property group, Andrews, reported that it received 226 calls from prospective buyers within an hour of opening its lines. A recent Rightmove survey report revealed that more than 94% of the sales agreed prior to the lockdown are on track to complete.
And this is the experience of Killens. Phenomenal demand has been seen with completions occurring and sales being readily agreed across all sectors. Five properties of different values sold within 5 days of being launched and offers have been received on others. In the rental market, with the sales market starting to move, there has been strong competition amongst potential tenants. With the newspapers reporting doom and gloom, those buyers who have attempted to renegotiate by offering up to 20% less have been disappointed as currently, in many cases, it seems that there are purchasers willing to step into their place.
Alongside this pent up demand, the lockdown has led to less properties being available with new listings in April being 90% less than in April 2019. This has helped to underpin prices. The current frenzy of activity may be short lived but may be a continuation of the confidence that was being seen in March. In previous crashes in the housing market, there were three clear factors that prevailed. Firstly, there was a deep recession leading to job losses and forced sellers. Secondly, credit dried up and thirdly there was a big run in house prices beforehand. Interest rates are set to fall and there has been no boom in house prices so the only factor that could lead to a dramatic fall in house prices is the onset of a recession.
The real test for house prices will be what happens when the Government’s actions to protect wages, jobs and home ownership come to an end. There will come a time when mortgage holidays and the furlough scheme will come to an end but, if this is carefully managed, alongside reinvigorated consumer confidence as currently being seen in the housing market, then a recession may not be as severe as many are predicting.
It does seem as if there is agreement within the industry that if house prices fall then this is likely to be a short term blip with the number of transactions set to recover by May 2021 and house prices predicted to grow strongly over the medium term with Savills predicting values increasing by 15 – 20% over the next 5 years. The pundits are now reviewing their forecasts and the general consensus is that prices are likely to soften by 5 – 10% this year before picking up in the Spring.
As we get used to a new normality, changes in attitudes are flowing through into the property market with a greater realisation amongst potential purchasers that they are able to work from home much more than before leading to stronger demand for properties away from the conurbations. At Killens, there has been keener interest from those seeking to “escape” from London and Bristol into the rural areas.
So overall, amongst all the negativity, there are positive vibes but how long these may last for depends upon the success of the Government’s measures in protecting the economy. For the time being, however, don’t believe everything you read in the national press! We need you property to sell or let and, if you are buying, be prepared to more competition than you may have envisaged.