Friday 6 November 2020

How will lockdown 2.0 affect the housing market?

England has entered another lockdown as a result of the Covid-19 pandemic. The restrictions may be less severe than back in March when the first national lockdown was announced, but nevertheless it will have many serious knock-on effects for a large number of people, which in turn is sure to impact the housing market. 

During the first lockdown, some estate & letting agents were known to have furloughed all their staff, unplugged their phones and become completely uncontactable! Most agents however (myself included) were even busier than normal, creating solutions so as to best serve their customers and continue to provide a service. 

Ultimately people still wanted 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! I was still able to accommodate such people during lockdown as the majority of the lettings process is completed online and via the telephone anyway. My normal move-in process however, where I guide the tenants around their new home and show them how things work, was replaced by me videoing myself doing this instead. 

The use of video has of course been one of the few winners this year. In the property world, this has meant the ability to do virtual viewings as well as pre-recorded video tours. These are commonplace amongst agents now (with varying levels of quality and success) and have become a great way for people to minimise their physical contact and travel, whilst being able to provide a good overview of any particular property. 

The housing market is one of the industries allowed to remain open during this second lockdown though, so there won’t be such a dependence on these methods this time round. Nevertheless, for everyone’s safety, convenience and to help fight the spread, it seems foolish to simply abandon these technologies, which I believe are now likely to become a permanent pre-cursor to ‘in-person’ viewings.

Similarly, I shan’t be undertaking my standard tenancy check-ups during this second lockdown, even though the less-restrictive guidance suggests I could (unlike during the first lockdown). They’ll either be postponed until lockdown ends or conducted via telephone, which worked well previously, especially for those tenants I’ve seen several times and note their home to always be beautifully looked after. 

Maintenance works can continue as normal this time around though, whereas the first lockdown restricted such call-outs to emergencies only. Simply carrying on because it’s allowed in the rules though, as opposed to actively reducing people’s travel and contact during the second lockdown, becomes a fine balancing act between serving customers, maintaining tradespeople’s livelihoods and keeping people safe.

There is likely to be an overall slowdown to the economy regardless of whether that’s through enforcement or sentiment though. Indeed, one thing that is likely to repeat itself during this lockdown is my need as a letting agent to acquaint myself with the variety of (ever-changing) financial support schemes on offer. Much of my time in March and April was spent helping my tenants navigate the choppy waters and, ultimately, to help them pay their rent so as to support my landlords through the difficulties too. The government has again extended the furlough scheme (of which 1.7 million people were a part of in October), 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 the first lockdown 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. 

From a rental point of view supply has been low, yet demand has been strong. The majority of properties I brought to market in the past few months were ‘let agreed’ within 48 hours, with houses especially quick to get snapped up. Some of this demand has come from tenants whose landlords have decided to sell, which is increasingly the case due to rising taxation and legislation. Plus, some landlords have been scared off or had their fingers burnt during the pandemic, which afforded many more protections to tenants, such as extended notice periods and a ban on evictions. 

The sales market may be facing a perfect storm next Spring though, as this supply/demand imbalance is likely to reverse. Many more landlords will finally get their properties back from non-paying tenants after the prolonged notice period and court backlog, whereby they will simply cut their losses and exit the market. This could coincide with both the stamp duty relief and Help to Buy schemes ending, putting a sudden stop to many transactions. 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. 

Of course, the politicians will be aware of this, which is why there’s already suggestions that an extension or further tinkering to some of these schemes is probable for the medium-term. As the days get shorter and the focus turns to Christmas, the property market typically slows down during the best of years. Lockdown 2.0 is likely to add fuel to that and without further government support to the economy there doesn’t seem too many reasons as to why the property market will start 2021 any stronger than it is likely to finish the annus horribilis that has been 2020.

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