Coronavirus - Impact on the property market
A crucial UK industry that’s finding itself impacted by the pandemic is property.
When the first confirmed COVID-19 cases were announced a number of weeks ago, the property world took note but largely operated as normal; now, the outlook is significantly different. Buyers, sellers and estate agents are all navigating uncertainty amid the pandemic, as home buyers and renters suspend their searches altogether.
Next, following the Bank of England’s decision to lower interest rates by 0.5 percentage points to 0.25pc, most mortgage lenders announced they will pass on the savings to mortgage holders from April 1. A third of outstanding mortgages in Britain have a variable-rate deal according to UK Finance, a trade body. This is equivalent to 2.2 million homeowners, surely this can only be good news for these homeowners.
Now the housing market has been halted on Thursday night by the Government after financial institutions said they could no longer operate properly. Valuers and surveyors are unable to inspect properties under current guidelines. One big lender, NatWest, confirmed that its partner firms were suspending all inspections. No mortgages can be completed without approval from a valuer.
So what is the future? Well no one really knows…… will property prices drop as unemployment hits and there are fewer first time buyers? Will the rental market fall through the floor as people move back in with parents? Is the London market going to be impacted the most as the hospitality world comes close to complete shutdown, at the same time many foreign workers head home as they short term opportunities dry up? Will investment banks be able to hold onto the 1000’s of workers they employ in the city? How long is it going to last, 6 months, 1 year, 2 years? I am sure there are the cleverest of brains trying to forecast the outcome and the reality is pretty gloomy. However the government can’t admit this, they have to proactively push the “positive” outcomes (even if these seem dire) otherwise the UK will grind to a halt.
In the UK property market the “halt” has happened, property sales are down 80% on 12 months ago and the rental market is on the edge of something catastrophic as people can’t pay their rent. A friend of mine has had 25% of their HMO tenants on the phone asking for rent free periods, a share of the rental pain or just for someone to listen to the woes they are currently going through. Landlords, who in turn may be unable to meet their mortgage obligations, or who are simply unsure how to respond to their renters’ plight, are likewise bound to be affected by the current situation.
Yes the above doesn’t paint a pretty picture. The property market, like all markets, wants more certainty so as the UK’s response to the crisis is more defined the property market will bounce back. We wait to see the measures and policies that Rushi Sunak puts in place to keep our country running.