A week ago, in England at least, the housing market was allowed to go back to work.
Viewings, valuations and house moves are now back on the cards. Estate agents could reopen their doors, with the adherence to the usual strict social distancing measures of course, and peer out expectantly for those buyers and sellers who had disappeared so dramatically overnight.
Zoopla estimates that around 373,000 property sales were put on hold during the peak of the coronavirus crisis, and mortgage broker Trussle estimates those that put the brakes on could wait five more months before coming back to the table.
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Mortgage lenders know many buyers won’t be able to pick up where they left off.
Tom Martin, mortgages director, Halifax, said: “[W]e make decisions based on a full understanding of customers’ individual circumstances and affordability. These are unprecedented times and some customers may have had or expect a change in their circumstances, which we will consider as part of the application process.
“From speaking to customers directly every day, we are seeing the demand to get moving as soon as possible, with calls to our mortgage applications centre up by over a third,” he adds.
“However, we would suggest taking time to do the research and seek expert advice before doing so, as well as heading online in the first instance to find out how much you might be able to borrow, which can be a much faster way of getting the process underway.”
Sarah Coles, personal finance analyst for Hargreaves Lansdown adds that the laborious buying and selling process itself doesn’t help the sense of uncertainty.
“Buying a property is immensely stressful at the best of times, so having the whole process frozen part of the way through has been excruciating. Even now the housing market has re-opened in England, there’s plenty of fresh agony to come.
“One of the most worrying questions for the hundreds of thousands of people who are mid-purchase, is what’s going to happen to house prices, and whether that means they should go ahead as planned, pull out, or renegotiate,” Coles adds.
“There’s a broad expectation that prices will fall this year. But nobody really knows how far, how fast, or for how long. It makes it nigh-on impossible to be certain of the best approach.”
In fact, house price predictions for 2020 vary enormously. Knight Frank, for example, expects a drop of 3 per cent by the end of the year but the Cebr thinks the fall will be closer to 13 per cent.
“One of the consequences of a big shock like Covid-19 is the increase in uncertainty – over economic conditions, employment, income levels and the housing market,” says Ivan Paya, professor of economics at the University of Lancaster and co-director of the UK Housing Observatory.
“When people face uncertainty the rational step is to delay the decision and I would expect to see a marked slowdown in the number of transactions for some time. People are on standby, waiting to see what happens when the situation becomes clearer.”
But this all assumes we will, eventually, make the same property choices, based on exactly the same needs, as we would have done before Covid-19 struck. And that may not be true, especially when it comes to work, commuting, and transport hubs – huge factors to consider when chalking up a property wishlist, and factors that may now have altered significantly.
Working from home is set to continue for months as a social distancing necessity. The longer that behaviour among employees and policy among business leaders continues, the more likely it is that we will become a nation of home workers – for a few days a week at the very least.
The Chartered Management Institute suggests 60 per cent of its members already want to split their working week between home and office after the pandemic. That’s a huge shift away from the default of five days a week of office presence.
That change alone could have a significant effect on our property location and size demands. We may not need to get to the office on the daily commute, but we will need space at home to work.
With densely packed urban areas now associated with health risks, are we about to see a move towards lower density locations if the proximity to the office is no longer a factor?
“A shift in demand and preference would come down to a question of the trade-off between location and space,” says Paya.
“Until now location has been very important, and it’s important to bear in mind that the daily commute isn’t the only factor affecting location, including schools and amenities, that are still important.
“But if Covid-19 changes working conditions permanently for most people we may start to see space becoming more valuable than location.”
So does that mean the property values might start to reflect a movement of people away from urban environments eventually? Will the inner city premium disappear and the divides across regions level out? If so, when?
“Supply changes are slower to come through than demand changes,” Paya warns. In other words, we might all want to cash in smaller homes in urban centres for larger homes in rural locations, but the availability of those homes won’t be as immediate.
“It’s difficult to see a significant shift in less than a year,” he adds. “There are people tied into contracts in one way or another, and factoring in that shift is a big decision to consider among other influences.
“But if a large proportion of the population works from home, we might start to see changes in prices in different locations to reflect that in one to three years.”
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