Return to business as usual for residential property?

The shackles are off with the Government’s decision to lift COVID-19 lockdown restrictions on house buying, selling and renting. This has caused a ripple of excitement, concern and speculation as to what may happen in the coming months and year in respect of the residential property market. This is the first market to be opened by the Government and it will act as a guiding beacon as to public confidence in the economy and its belief in its ability to rise or bounce back once the COVID-19 lockdown restrictions are more generally lifted over other markets.

Are price falls inevitable?

It is difficult and precarious to predict the residential property market going forward. London’s Super Prime markets have seen heavy falls in trading and valuation over the past five years and it may well be that this trend continues as a result of the absence of overseas buyers, negative economic growth of the economy and general downward turn in this market. In respect of the Prime London market, trading was on the rise prior to the virus outbreak. Leading forecasters are suggesting a 5 percent drop in value has taken place across the market and this is largely mirrored in price reductions we are seeing on previously frozen transactions, which have seen reductions of 5 – 7 percent of the purchase price being agreed following the re-opening of the market. This trend is replicated in the towns, cities and provinces throughout England. 

Interestingly, Rightmove shows few immediate reductions in value on those properties which were placed on the market prior to lockdown. Where properties were taken off the market they are tending to be put back on at the same price as before and sellers are remaining bullish. It remains to be seen whether they will realise these values on sale.

The home-working factor

Looking forward, supply and demand will continue to push the market. There is a general feeling that lockdown will leave many wanting to find properties which have larger gardens and more space which can be adapted for office use, with working from home being a long term solution for many businesses to reduce office space costs and rethink working practices.

Finance

• Lending will have an influence on the market. Interest rates are currently at an all-time record low, which makes mortgages attractive. However, approval for credit is likely to be more rigorous and slower. Applicants are likely to be asked by their mortgage lender whether they are furloughed and this could affect their credit. Lenders will also be keen to ensure that valuations take into account any fall in the market and surveyors are likely therefore to provide cautious valuations for mortgage purposes. The first time buyer market is likely to be affected.
• Sterling is currently at historically low levels against the dollar and other currencies which makes it appealing for international buyers to buy in the UK. The difficulties in travel and quarantine requirements may however quash that appeal.
• There is no indication of any changes to SDLT being announced in the short term. Any such changes could spark a rise in property buying. The Government has previously confirmed the additional 2 percent for non-UK residents would take effect from April 2021.
• Fears of rises in unemployment, loss of bonus payments and concern regarding the global economy are likely to keep the market supressed.

Opportunities await

Eyes will be firmly focussed on the residential property market for signs of early recovery and confidence in this sector to throw light on what may happen in others and whether it can kick-start the economy back into motion. It remains to be seen what will happen but there are positive signs and there will be exciting opportunities as a result.