A complex question and one with no certain answer. In these uncertain times it seems the only thing that is clear, is that no-one is quite sure of anything. However, various market commentators have outlined possible scenarios, some of which are included below.
Prior to the outbreak it seemed the outlook was good. With a conservative majority in place and the Brexit saga coming to a close, the phrase ‘Boris Bounce’ was coined to describe the uplift expected. However, a global pandemic was not factored into these predictions. The estate agent Savills considers the significant factors of the pandemic impacting the housing market to be; the practical and logistical challenges of transactions completing successfully, the impact on buyer sentiment and reduced affordability for those working in the worst financially affected industries. Aside from the obvious long term impact of how job losses may impact individuals and the market, in the short term there is almost a physical barrier to transactions being able to complete or progress as many of the parties involved with a transaction are confined to their homes.
Which? published an article, citing estate agency firm Knight Frank, predicting that “UK house sales will plummet from the 1.175 million recorded last year (2019) to just 734,000 this year”. They also predict that 2020 prices will fall by 3%, however, will bounce back by 5% in 2021. The timeframe of any impacts on the housing market is particularly difficult to anticipate as we are currently still in the early stages of attempting to contain the virus and the recovery process and timescale remains unclear.
The Financial Times have also given their take on the likely impact of Covid-19, stating that transactions may reduce even more dramatically by up-to 50%. In the same article, a representative of Zoopla predicts the most significant reduction of transactions is likely to come from May/June 2020 statistics.
On the bright side, policy makers are taking steps to limit any negative impacts. The Bank of England have cut the base rate to an all-time low of 0.1%. Potentially good news for borrowers, less-so for savers. So will this be enough to encourage those with money in the bank to invest once restrictions are relaxed? Time will tell.
In summary it is unclear what the outcome for any given individual or property may be. It is likely that transaction statistics will be greatly reduced, as the market has been effectively paused for a period. How long this period of stagnation goes on for depends greatly upon government guidance. Once it is deemed safe for social distancing restrictions to be relaxed and surveyors, estate agents, solicitors and buyers themselves are able to return to some form of normality, only then will the structure be in place for the market to function.
What impact the reduction of transactions will have on price is also difficult to predict. A simple supply and demand model would assume that less homes on the market would drive prices upwards. However, as we saw in the recovery from the recent financial crisis, when buyer sentiment is affected everyone tends to wait for someone else to make the first move. So, it may also be a case that demand is low and the market takes time to recover.
For now, h&s have taken the decision to limit physical inspections of property to help prevent the spread of the virus. Once restrictions are lifted, we look forward to helping to advise on your purchase. In the meantime, you can get in touch with us via the Contact Us page and would like to wish all our clients well. Stay safe.