The COVID-19 emergency has had a tremendous impact on the property market. However, economic forecasters agree that the disruption is likely to be short term, so we can expect to start seeing an increase in activity relatively soon.
Property transactions in China have started to recover to around 50% in the past two months. One of our clients, David Kaye of Ebury, spent last Thursday watching Savills residential property auction online and concluded that around 50% of the lots were withdrawn in the days before, 25% sold and 25% remained unsold. Consequently, David predicts that house and flat prices in and around London will decrease by 5-10% in the coming months.
Forecasters say that unemployment will rise this year, however they predict that this will be a short-term consequence and will return to normal levels in 2021. Economists also expect interest rates to remain around the current level for years to come.
A multitude of factors have contributed to the decrease in home buying activity: Brexit, the general election and, most recently, government advice not to move house. Therefore, it is likely that we will start to see an increase in activity at the beginning of 2021.
David Kaye suggests that there will be few opportunities for distressed sellers under pressure. However, interest rates are low and agents are reporting price ‘chips’ from buyers where deals are not aborting. Forecasters predict that the UK will experience a vast decrease in the volumes of transactions over the coming months, which will inevitably affect the market. However, house values are expected to remain largely unaffected. Once all the restrictions are lifted and provided the government measures to protect the economy are effective, the market could recover quickly.
In response to the crisis, some local authorities have redirected funds away from non-critical services, such as planning. This will make the application process even longer for sites with planning permission, but the value of the developments should hold firm.
Finally, some banks are still lending, at a reduced loan to value, so people may find an unusual opportunity at this time.
Back to top