Transaction Volumes Affected by Coronavirus – March 2020 Roundup
With one of the strongest starts to a year since 2015, prior to the global outbreak, the UK property market enjoyed a bounceback in confidence from buyers during Q1, leading to headline house price growth of 1.6% compared to relatively weaker growth of 1.2% in 2019.
At a regional level, key cities continue to outperform traditional investment markets in the South – witnessing growth anywhere between 3.8% and 2%. Quarterly house price growth has also trended positively after posting negative results last year.
Transaction Volumes Affected by Coronavirus But Prices Hold Strong
As expected, the outbreak of COVID-19 has rapidly changed the landscape of the market. While prices are holding firm, demand has taken a dip as buyers look to self-isolate under lockdown rules.
Since the World Health Organisation (WHO) labelled COVID-19 as a pandemic around March 11th, Hometrack has witnessed a 40% decrease in buyer demand. This could be considered a certainty given the nature of the outbreak, especially with the Government suggesting both renters and homebuyers delay moving in a recent guide.
However, as historical data has shown us, property is a relatively stable asset compared to other investments and expert forecasts from JLL suggest a similar situation to that of the SARS outbreak in 2003, a short shock to the global economy that was quickly followed by a rebound in demand and growth.
We’ve taken a deep dive into the impact that Coronavirus could have on the UK property market. Read more here.
Economic Impact to Dictate House Price Impact
While it’s too early to make a solid comment on the long-term effects of the outbreak, the closest comparable past performance shows us that external market forces always tend to impact demand over prices, which are more susceptible to direct economic shocks.
Government action to support landlords should help to ease the number of people forced to sell, though the overall impact on the economy will largely be driven by the UK’s employment outlook.
Prior to the outbreak, Oxford Economics forecasted a 2.7% increase in total employment and a 6.8% in household disposable income between 2020 – 2024. While this has likely changed with the impact of the virus on the retail and hospitality sectors, the consensus seems to be that the long-term outlook remains positive.
Mortgage Offers Extended by Three Months
In response to Government guidelines on social distancing, many mortgage lenders are giving customers the option to extend their mortgage offer up to three months, provided they’ve exchanged contracts.
According to Stephen Jones, chief executive of UK Finance, a trade association for around 300 financial firms in the UK: “To support these customers at this time, all mortgage lenders are working to find ways to enable customers who have exchanged contracts to extend their mortgage offer for up to three months to enable them to move at a later date.
“If a customer’s circumstances change during this three month period or the terms of the house purchase change significantly and continuing with the mortgage would cause house buyers to face financial hardship, lenders will work with customers to help them manage their finances as a matter of urgency.”
This will be a welcome move for many that were in the process of buying, particularly with the rapid onset of new distancing rules due to the outbreak.
Predictions Following 2020 Budget
While the budget announced earlier in March was relatively light on housing news, it contained a number of important pledges by the Conservative government for the year ahead.
One of the main considerations was the announcement of a 2% stamp duty surcharge on properties purchased by non-UK residents. Due to come into effect in April 2021, the reduced surcharge – originally speculated to be 3% – is designed to help raise the Government target of £650 million for rough sleepers in the UK.
This should be somewhat of a welcome relief for overseas buyers, who may have had to contend with a higher surcharge much sooner than anticipated – crucially guidance is currently expected on the impact of this measure and whether buyers exchanging on or before the 31st March 2021 will be subject to the new or historic charges.
It may also result in a shift over the next 12 months, with increased urgency from international buyers in prime UK areas, as they look to secure their investments ahead of time and avoid paying the higher costs.
Elsewhere, the Budget reiterated many of the original manifesto commitments including the development of 300,000 homes a year – closer to Government estimations of nearly 345,000 homes needed to meet demand – in an effort to reassure buyers, sellers and developers that may have had concerns around market stability.
According to Ross Counsel, director of property buyer Good Move, the budget ‘spells continued rise in house prices’.
“Compared to even a few months ago, things are looking much more certain across the country… The property market is far more stable now compared to before leaving the UK.
“Following recent news that houses prices have risen in all UK regions for the first time in two years, we can now expect this trend to continue.”
Of course, all expert opinion and forecasts prior to the current Global Health crisis remain speculative at best whilst the outbreak continues to impact global economics, SevenCapital will continue to bring you all the latest property news and opinion over the coming weeks and months.