As of now, our local estate agent remains closed. There is a sign on the door referring people to properties for sale or rent on Zoopla, and another simply inscribed #staysafe. These are signs of our times. Two weeks after the UK government announced a series of “back to work” measures for England’s housing market, conditions are clearly not back to normal quite yet.
On the other hand, Britain’s largest online property website Rightmove says surging sales and rental enquires mid-month signify a sudden release of pent-up demand. Traffic to Rightmove’s website on the first day that restrictions were relaxed was 4% higher than on the same day last year1.
The government estimates more than 450,000 buyers and renters have been unable to progress their plans to move since March. However, since 13 May, movers in England have been able, in theory, to view properties in person and use estate agents, conveyancers, removals firms and tradespeople2.
Perhaps we shouldn’t get too carried away just yet with these glimpses of normal life. We are certainly no better than at the nascent stage of a recovery. Window shopping on the internet is one thing – having the confidence to go through with a house purchase is quite another.
There’s also the prospect a significant number of people will find themselves in a weaker position to proceed with a move. Research out earlier this month from the University of Chicago gave a chilling picture of employment prospects in the US saying two in five jobs lost during the pandemic may not return3.
While the outlook for jobs in the UK may be far less severe than that – especially with 7.5 million workers now furloughed – job losses and raised job insecurity are bound to transmit further ripples across the housing market4.
Some would-be home buyers will undoubtedly see the world very differently compared with three months ago. The lockdown may have laid bare the limitations of the homes of many people – too few rooms to comfortably live in with others, perhaps; or a lack of outdoor space for recreation and relaxation. For them, with more time than usual to think about the matter, the desire to move on may just have been greatly amplified.
Perhaps the longest lasting effects will come from an accelerated trend towards “working from home”. For millions of people and the companies they work for, the lockdown has proven that business can carry on even when there’s no office to go to.
One of Britain’s first big bosses to publically recognise this was Jes Staley, the CEO at Barclays. Last month he called time on keeping 7,000 people in a single office block, presumably with the bank’s skyscrapers in London’s Canary Wharf and elsewhere in mind5. His idea of head office staff possibly being redeployed to bank branches has obvious implications for local property markets beyond the urban sprawl.
It seems reasonable to suppose that a lower usage of city centre work locations could raise the demand for homes in rural locations, while reducing the need for homes close to railway stations and bus routes. Future property buyers may shift their focus away from London and the South East to cheaper or more remote areas.
Unsurprisingly, shares in UK housebuilders and estate agents have rallied since restrictions on the housing market have eased, even though in which ways and by how much underlying conditions have changed are, as yet, unknowns6.
A changed housing market could pose enormous risks as well as offer fresh opportunities to incumbent companies. Many may find they need to adjust rapidly to where and how they build and market properties and the ways in which they communicate with their customers. It will be interesting to see, for example, if layouts see subtle changes to better accommodate permanent home office spaces in future.
There is, of course, the perennial question of house prices. Here, we are currently operating in the dark. Rightmove has temporarily suspended its seller asking price data because too few properties have been coming to the market since March7.
What we can say though is that one of the ingredients for a price crash – rising unemployment – is with us already. The other – high interest rates forcing homeowners to sell – is notably absent. That makes a very substantial fall in house prices – such as the 36% peak-to-trough collapse we saw in the early 1990s – unlikely8. As the current crisis wanes, ultra-low interest rates will still be making mortgages affordable.
Two big questions remain though. The first involves the extent to which lenders are able to provide credit in the months that lay ahead, despite pressure from the government. The forthcoming recession and a likely rise in bad loans will place new strains on banks and other lenders, potentially making them less keen to write new mortgage business. Hopefully, the strict affordability checks imposed by lenders ever since the global financial crisis will help keep a defaults surge at bay.
The final question is just as vexed. Is the buying public yet feeling sufficiently confident to explore pastures new? Their interest in the property market certainly seems to have survived the crisis but, in the complex world to come, might it still not be much simpler to put off a move, at least, until next year?
1,7 Rightmove, 13.05.20
2,4 GOV.UK, 13.05.20
3 University of Chicago, Becker Friedman Institute for Economics, 05.05.20
5 Reuters, 29.04.20
6 Bloomberg, 27.05.20
8 FT, 17.01.19
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