Now England has entered yet another lockdown due to the Covid-19 pandemic. As much as the restrictions are less severe than lockdown 1.0 back in March, we still expect serious knock-on effects for a large number of people, which will inadvertently impact the housing market.
Lockdown 1.0 saw some estate & letting agents furloughed most if not all their staff, unplugged their phones and become completely uncontactable! While others continued to operate and were busier than prior to lockdown.
People still wanted or needed to move home – particularly those moving for critical work positions or who would be made homeless, having already sold or given notice on their current property! This gave rise to live (virtual) video viewings and pre-generated 360 degree videos of properties to enable buyers and tenants to view potential properties from the comfort and safety of their own home.
Unlike lockdown 1.0 the housing market is one of the industries allowed to remain open during lockdown 2.0 negating the huge dependence on virtual viewings. With that said keeping safety in mind these technologies will still be important prior to in person viewings.
With so many non-essential shops and service closing their shutters again there will be a slowdown to the economy. Various financial support services will be made available to help tenants pay bills / rent. The government has again extended the furlough scheme as well as the self-employed income support scheme. In addition to these emergency schemes, there were 2.4 million people who sought Universal Credit for the first time in the two months after lockdown 1.0 started!
The period between the two lockdowns was noticeably busy for the housing market. Predictions of property prices dropping were quickly quashed as the market was propelled by a variety of reasons for people wanting to move, along with a further reduction in interest rates and the stamp duty savings on offer for purchases completed by 31st March 2021. This has led to property prices across the UK standing 2.5% higher than a year ago.
The student rental market took a major hit this year with many issues related to A-level students being graded without final year exams meaning some didn’t make the grade for conditional University offers. Many students have deferred until next, while some had grades adjusted enabling them to attend the University of choice prompting frantic searches for accommodation. Some landlords have opted for professional tenants in their HMOs this year with a return to students next year when things are more stable.
The Bank of England (BoE) has injected £150bn into the economy, as part of quantitative easing (QE), ahead of increased restrictions across the country. Moreover, the BoE’s monetary policy committee (MPC) have unanimously voted to maintain the base rate at 0.1%. In the 12 months to September 2020, CPI inflation increased to 0.5%, however, remained significantly below the MPC’s target of 2%. The bank attributed this to the temporary impact of lower energy prices and the reduction in VAT, as well as some downward pressure from spare capacity. In addition, the BoE predicts that as the UK leaves the Single Market and Customs Union on 1 January 2021, UK trade and GDP will also be affected.
The sales market has been frantic since lockdown 1.0 was lifted, this is mainly due to the £89bn of transactions on hold. Once the market has caught up with these transactions and the stamp duty holiday and help to buy schemes end next March, we’ll learn to true state of the UK property market. Many more landlords will finally get their properties back from non-paying tenants after the prolonged notice period and court backlog, whereby they may simply cut their losses and exit the market. If this occurs at the same time as the furlough and self-employment support schemes end, unemployment will surely rise, meaning disposable incomes and affordability will decrease.
What are your thoughts on lockdown 2.0 and the property market?