Well, the short answer is, who knows? This crisis is unprecedented and there’s no handy historic map to tell us what happens next. But we’ll do our best to try to apply some common sense to an answer to the question.
First the reality. According to estate agents and property portal data from the likes of Zoopla and Rightmove, enquiries and transactions were down by between 70% and 80% at the beginning of the crisis. One large London estate agent had stated that they believe that there will be 500,000 fewer residential property transactions this year, around 600,000 instead of 1.1 million. The property market is, in effect, frozen as agents furlough the majority of their staff because government advice says that visits to homes are not allowed and this means that new listing appointments and viewings have been shelved.
Some mortgage lenders have pulled up the drawbridge on high loan to value products with, for example, Lloyds stating that they will only currently lend at less than 60% of the value of a property.
But, there are reasons to be optimistic. Recent surveys by, for instance from one of the big conveyancing firms, shows that the deals that had been done before lockdown are predominantly remaining intact and that the majority of estate agents expect most of their pipeline of sales to complete once lockdown is relaxed and normality starts to return. This is reassuring.
Yomdel, a web chat provider to the property sector, has published data this week that shows a marked improvement in enquiries to agents – both by sellers and by buyers and it does appear that a more positive sentiment is returning to would be home-movers. This aligns with research that we have done into the Chinese property market and that clearly indicates that transactions are already back to where they were before anyone had ever head of CV19. This seems a decent proxy for the UK market.
A few pundits have had a stab at predicting what house prices will do this year and next and we’d say to that ‘How could you possibly put an actual number on it?’ To cite a 3% drop as Knight Frank have done is a pretty brave yet blind bit of crystal ball gazing. So we won’t be predicting a specific percentage here.
But we will say that if unemployment is mitigated by the Government’s furlough scheme and this can hold together; and with interest rates at miniscule levels, these fundamentals may well prop up demand and therefore prices.
Unemployment, the cost of money (and its availability) and consumer sentiment are the three foundations of a buoyant property market. It’s those three indicators that we will all be watching closely in the coming weeks for early signs as to whether demand will fall away enough to provoke a house price crash. It’s very unlikely though in our opinion especially with pent up demand being high as a leftover out of Brexit uncertainty and, after all, the fact that we remain an aspirational home owning nation with the majority of people aspiring to owning a home.