What will UK property prices do during and after COVID-19?

Property Prices and COVID19

For many years now it has been a relatively care free upward climb in property prices with many regions seeing decent annual increases. ‘Demand & Supply’ is usually what causes the value of anything to be set, currently there are plenty of takers for property both for sale or to rent, some areas there are increasing demands and constant battles trying to supply.

Us Brits have had a long love affair with property and we are still very much a home ownership favouring nation, to be king of our own castle and seeing property as setting us within an asset class as such… Keeping up with the Joneses.

Since the mid 1990’s average property prices have been scaling upwards with only a mere brief blip in 2008 that saw a very quick recovery and return to a positive climb. For many owning a property remains merely a dream as prices are out of reach, a constant battle between saving and seeing prices increase, a kind of win and lose situation. Renting a home has been what many of the younger generation or those who were not home owners from the mid 1990’s and were able to see their property rise in value have had to be doing for a long while now.

“The number of households living in the private rented sector in the UK increased from 2.8 million in 2007 to 4.5 million in 2017, an increase of 1.7 million (63%)” Source Office for National Statistics.

House prices and COVID-19

Early 2020 seemed like to be all positive for the UK economy. Brexit finally done, a majority in parliament with a clear directive and a prime minster who seemed to be wanting to get things done. There was a feel good factor for many in business and in property, but then came along a new word for many being corona-virus and since then we have been in lock-down and the property industry has seen a 70% drop in activity.

How long will the COVID-19 as many will know it now last (writing this article on April 9th 2020) and how long will the recovery take? Will it be back to normal ever so quickly or will the economical impact for both the government and the population be a longer route back to normality?

We decided to put the question out to estate agents and individual property professionals across the UK to get their feedback. These people are behind the lines, they are seeing and feeling the impact of COVID-19 and also have an experienced opinion to share.

 

Paul Keighley, Partner at Bramleys:

Activity prior to the COVID-19 outbreak was strong, so hopefully if the lock-down does not last more than a couple of months the market should recover reasonably well. There may be a very small dip in values as things stabilise but there is no reason to think that it will be disastrous. We are still receiving offers and requests for viewings when the lock-down is relaxed so there is an appetite out there“.

 

Ugo Arinzeh, Founder and MD of Onyx Property Consultants:

I think it’s really hard to gauge where property prices are at the moment. On the one hand buyers, even if they wanted to buy, may not be able to get bank financing as many banks have suspended any new loan applications. On the other hand, there is limited supply as sellers will not be putting stock on the market as estate agents will not be able to adequately value it or appropriately market it through the normal channels using great photographs and viewings. I think both sides are prepared to “sit tight” and we’ll have a better sense of London property prices when the lock-down has been lifted.

After COVID-19, of course no one really knows how things will recover, but I will say the dynamics of this shut down have been swift and almost universal.  Perhaps there will be potential buyers who have since lost their jobs, so that may reduce demand. However, I suspect that there will be a lot of pent up demand to make a move.  I had several deals stop in the middle because the mortgage lender stopped the underwriting and therefore I suspect so long as those people are still financially secure, they will want to transact.  Sellers will be eager to sell, perhaps some who having spent several months isolating in their home will realise that they have outgrown it.

 

Chris Salmon, Operations Director at Quittance Legal Services:

We think that there will be a post lock-down wobble. However, the underlying drivers of supply and demand remain constant, so we anticipate a recovery in transaction volume in Q3.

We are not seeing any evidence in our data that transactions are falling through. A powerful combination of historically low-interest rates and pent-up demand should dampen any price fall after the lock-down ends.

The Bank of England is likely to keep rates low for the foreseeable future due to massively-increased government borrowing. Our conveyancing solicitors are preparing to be overwhelmed once the market restarts.

So in short, we think the drop in house prices will be short-lived, and a glut of demand will push them back up towards the end of the year.

 

Alex Willcocks, Project Manager / Owner of Burbeck Capital:

From an SME developers perspective we are not adjusting our exit values on project finishing between now and Summer 2021. The projects we currently have in build were modelled in Q2 or Q3 2019, and given the current projections on property prices we feel the supply and demand equation will continue to hedge our values. Along with other factors such as low interest rates. Our expectation is that product will be key, best in class will still trade and if corners have been cut so will capital values. As developers we will continue to refine our product and invest in unique interiors, dressing all of our units to give our partner estate agents the opportunity to achieve the best price per sq ft we can for our developments.

 

Maurice Kilbride BA (Hons) MNAEA, Owner of Maurice Kilbride Estate Agency:

Various so called property market experts have been plucking figures out of the air claiming house prices are set to drop by anything from 10% to 20%, with many suggesting there will be a recession when we come out of the Covid-19 at least in the short term. I tend to take a slightly less pessimistic view, for sure there might be a correction in Q2 and Q3 this year, especially transaction levels, but nothing like the % drop in house prices suggested and by Q4 I feel the market will start to come bouncing back. Of course, all this is speculation depending on what happens with Coronavirus and how long its effects last.

 

James Dawes, CeMAP, Director at JWD Mortgages:

My understanding of how we are all coping comes from a personal and professional one working within this current COVID-19 crisis. Many of my clients are discussing with me how they are finding it stressful both mentally and financially, and hoping for a return to normality soon. With those people already inside the buying process I am seeing that many factors depend on whether they can or cannot physically complete on a purchase now – and I am staying available to them for guidance.

For new remortgaging or purchasing cases it is still possible to apply with some of the main mortgage lenders, and they are staying open for business where they can. Whilst interest rates remain historically low, there are some areas of criteria which lenders are working on. The key issue is how valuations take shape and then they also have implemented temporary loan to value limitations on borrowing. I feel that these questions can be dealt with via an open discussion with your mortgage adviser, and for me that is the key behind securing the best advice.

Buying or financing property is a financial, physical and emotional decision – and today’s climate has an impact on us all. The main thing is to stay home and save lives, and I am personally supporting the Mind charity with donation open now.

 

Sarah Edmundson, Estate Agency Trainer & Consultant at The Allstars Group:

There are reports of property price reductions of anything up to 10% by some industry commentators, but fundamentally it will all boil down to the key variables within the market including; unemployment rates, lenders product range and interest rates. It sounds simplistic but the property market is always driven by supply and demand; as we have seen for many years it is possible that higher demand in certain geographic areas will drive prices up, possibly less people needing to live in cities as working from home becomes more normalised. Conversely this may also affect those city areas as people review their lifestyle choices post lock-down. In the last few weeks I have many conversations with property and non property people and the “we want to invest in property, it is the only place we feel our money is safe long term” has been said multiple times, and this sentiment will of course lead to increased demand.

And, if prices do reduce by 10% as some think they will – if you are moving upwards; you have more to gain in real terms from any reduction in overall prices.

 

Iain White, Consultant to the Property Industry:

We will in my opinion definitely see a bounce in sales activity initially as life returns to normality after Covid-19 and lent up urgent demand rushes through the system .

After this initial period we will almost certainly be in a recession. How deep and how long this will last for depends how long we are in this semi lock-down phase.

It’s fair to say the market was performing well in most areas both price and volume of transactions.

I think it most likely will see some downward pressure on prices with lending criteria hardening due to a recession and desire for aspirational moves softening.

I don’t subscribe to the total market collapse perspective because life goes on and it always has and will. Any price drop will be in my opinion in single figures percentage wise followed by price rises long term.

 

Anthony Hesse, Managing Director at Property Personnel:

What I am absolutely certain about is that no one really has a clue quite how long this pandemic is going to affect our lives. This creates uncertainty, and as we all know, uncertainty is never good for the property market. On this note, most of my clients were benefiting from the positive effect of the ‘Boris Bounce’ and the future was looking bright. Not so now. The property market is pretty much on lock-down, like the country. However, during this time I suspect property prices might hold firm.

So, what it will be like when we come out of the other side? Interest rates will be at a historic low, so it will be cheap to borrow, but will the banks be willing and able to lend? Affordability due to cheap money could actually see a rise in prices as pent-up demand outstrips supply but, for me, the biggest issue will be jobs. We could see a huge rise in unemployment, especially once the government closes its Job Retention Scheme which it will have to at some point. This would obviously have the opposite affect.

 

Dominic Murphy, MD & Founder of Solihull-based DM & Co and DM & Co Premium:

I expect the volume of properties going on the market to surge once the Government relaxes the lock-down rules, house prices are likely to remain as they have been for the past 12 months.

We’re incredibly fortunate in the areas we operate in because it is particularly well protected by its good transport links, schooling and the strength of the second city’s economy,” he said. “It is inevitable that we will have to deal with purchasers who think that property is worth less post COVID-19, but the fact of the matter remains: driven by location, location, location, the resilience and strength of the marketplace here means if you want your child to attend the very best local schools, there is a price to pay.

“We’re still getting requests from potential sellers, asking us to value their properties, but my view is that while it keeps us talking, I’m not going to market anything until the Government relaxes its rules. To value a property properly I need to be there, and touch and feel it. The virtual valuation isn’t a good alternative. Similarly, to buy a property you have to physically visit it. This isn’t an overseas investors market; it is driven by ‘second steppers’ and they are educated buyers, more so now than ever before.

“In the meantime, I have 25 instructions that are ready to go, once we see the light at the end of the tunnel. People are not thinking about moving at the moment and there have been no dramatic spikes in traffic to the portals. Why? Because this isn’t Christmas; it is a genuine restriction of our movement and that does not translate into agreeing sales – the general public is worried about their families and the health and safety of those around them. I do envisage there will be lots of activity in the three-six months post COVID-19.

 

Darya Kolas BA (Hons) MSc MRICS, Director & Registered Valuer at Copping Joyce:

I just wanted to comment that, although it is too early to asses the impact of COVID-19 on the UK property prices, we have seen several house builders delaying or withdrawing from land acquisitions due to the uncertainty. In the meantime, an increased number of sites under construction are experiencing delays associated with the temporary suspension of work and supply chain disruptions. Although we are yet to find out how long the lock-down would last, we anticipate a reduction in new homes supply, specifically in 16-24 months from now.

 

A big thank you to all that shared their opinions with us following our call out Tweet on Twitter – The power of social media still very much alive and kicking – Do follow Estate Agent Networking today via @EAUKNetworking.

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Christopher Walkey

Founder of Estate Agent Networking and an internationally invited speaker on how to build online target audiences using Twitter and LinkedIn. Writes about UK property prices, housing and affordable homes.

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