One of the victims of the COVID pandemic has been the housing market. It has been impacted direct, and indirectly by the following factors:
· Reduced earning for most, loss of income for many
· Reduction in house sales due to lockdown
· Reduced confidence in the markets, which reduces confidence in making a major purchase
House sales have halved during the lockdown. Given the restriction on travel etc that’s not overly surprising but once the lockdown is over it is unlikely that house sales will return to usual levels any time soon.
The consensus view is that house prices will drop, but not to the extent of the 2008 financial crises. For a deep drop the logic is that there would need to be high levels of unemployment and higher borrowing costs.Though unemployment is likely to rise there is unlikely to be a significant rise in interest rates, for the foreseeable future at least
So, what is likely to happen.
First let’s caveat all the following that NOBODY KNOWS what will happen over the next six months. In an unusual step the housing market the Office for National Statistics last week temporarily suspended its UK house price index from the April index until further notice. This only adds to the lack of clarity as to what is happening with house prices.
Having said that experts are making educated guesses across a range of scenarios that may come to pass:
Per the Guardian, economists and housing experts are forecasting UK-wide price falls of up to 13%, with “brutal” declines in some areas, as the property market struggles to rebuild during the coronavirus crisis. The Centre for Economics and Business Research predicts that 2020 prices will be down by 13%.At the other end estate agent Savills said the hit to the market could be more like 5%, and a third of valuation surveyors are predicting that price falls maybe limited to 4% or less.
A lot will depend on how long the lockdown (partial or otherwise) continues, how severe the recession is and how badly individuals are hit in terms of loss of income.
This uncertainty has a greater than average impact on the ‘Cash for Homes’ market. The whole market is dependent on the operators having a firm idea as to what the market value of a property is and having confidence that they can turn the property round in a reasonable amount of time. Neither of these factors exist at the moment, making it extremely difficult for these businesses to operate. That is not to say that deals can be done, but there is a likelihood of the purchase discount being increased.
Hopefully, this state of flux will abate quickly once the UK economy comes out of lockdown and the ‘new normal’ becomes clearer. With people losing their jobs, losing their businesses, and losing income it’s unfortunately highly likely that there will be an increased demand for quick sales as well as standard house sales.
As always, whatever decisions are taken, the house sellers need to be fully informed. Please don’t hesitate to contact us if you’d like more information about options. Also do not feel pressurised by any business into selling your property without getting advice from a number of professional advisers. These are difficult times and being fully informed is key to making such important decisions.