But it wasn’t met with recognition by many on the ground in the property industry, who are now bracing themselves for a stall in the newly resurgent housing market as economic and health fears grow around the spread of coronavirus. Realistically, how much of an impact could the current health fears actually have on house prices? And should buyers and sellers really be concerned?
In broad terms, we’re in unprecedented territory. The last two corrections in the UK housing market, brought about by the early nineties recession and the global financial crisis of 2008 were largely as a direct result of economic pressures, albeit slightly different ones in both cases.
What we’re seeing now is the escalation of financial uncertainty created by a pandemic, which is something quite different entirely.
The fact does remain, however, that in every market there is always a cohort of buyers and sellers for whom moving home isn’t a discretionary decision.
These are referred to as ‘the three d’s’ – death, divorce or displacement. While the moniker can sound crude, it covers those who are perhaps selling a property following the death of a spouse or family member, as well as those who have to move home due to a new job in a different area, or family movers who need more room to due to a growing or increasing brood. The divorce element is of course pretty self-explanatory. In other words, these are decisions made around buying and selling that aren’t necessarily voluntary.
House prices UK: Will coronavirus affect the property market?
Over the last five years or so according to data from HMRC, the average number of residential properties sold in the UK has been relatively steady at around 1.15million transactions a year.
In the past fifteen years, 2008 stands out as being the worst year for property sales, when there were just over 792,000 completions. In 2009, there were approximately 893,000 residential property transactions, with just over 876,000 completions in 2010.
What does this tell us? Well, one would suggest that while these aren’t the heady numbers of sales seen at the height of the 2006 property boom, when over 1.7million homes were sold in a twelve month period, they do at least constitute a significant number of people who still want – or actually, need – to sell, regardless of economic headwinds.
Staying with the 2008 credit crunch for a moment, there is another factor that should help to quell some nervousness today.
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Tomer Aboody, director of property lender MT Finance is quick to reassure that the fundamental difference between the pervious financial crisis and the current situation with Covid-19 is: “Then, the banking system was in an obvious mess. No-one was able to predict how it would pan out or how to deal with such an unknown situation with any confidence.
“Although now the virus is bringing the world economy to a halt, the basics of the banking world are still there, with plenty of money within the financial markets being pumped into the economy trying to get yield. This, along with mortgage rates at such low levels, gives buyers the ability to purchase and realise their desire to move.”
With the Bank of England implementing an emergency rate cut on Wednesday last week, there are rumours already circulating that Andrew Bailey, who replaces Mark Carney as Governor today, could call for yet another reduction in the bank rate at the next Monetary Policy Committee meeting later this month as a reaction to the emergency rate cut and quantitative easing methods announced by the Fed in America in the last twenty four hours.
Should this turn out to be the case, it’s possible that we could see the rate dip below its current record low of 0.25 per cent as the UK takes part in co-ordinated action between Japan, Canada, Switzerland, the Eurozone and the USA. Although at what point, if at all, this measure is implemented by Mr Bailey does of course remain to be seen. One can imagine he may prefer to keep some ‘fuel in the tank’ should he need it in the months to come. In any event, it’s a tough first day in a new job by anyone’s standards.
House prices UK: Will coronavirus affect the property market?
If this does transpire, either now or at any point in the not-too-distant future, it’s likely that little if any reduction will be passed on to borrowers in the short term.
That’s because lenders may need the additional margin in order to offer those with existing mortgages the opportunity to take a three month mortgage payment holiday should they find themselves unable to work due to the impact of Covid-19.
We saw this last week when the Bank Rate was reduced to 0.25 per cent, as some lenders withdrew their tracker products altogether, and some repriced them with a slightly higher rate.
That all said, mortgages product rates are already at or around historic lows, meaning that many buyers are finding that borrowing affordability calculations are working in their favour, at least for moment.
This, together with the pent-up demand created by uncertainty around Brexit over the past three years or so, had meant that many estate agents were starting to see a significant uptick in activity since January, as those who had put off moving previously had now decided to go ahead in 2020 due to the political certainty afforded by the election result in December. It’s these people that may now decide to shelve their plans yet again, if their move isn’t a necessity.
North London estate agent and former RICS residential chairman and Jeremy Leaf suggests that whilst viewing numbers have reduced over the past week: “It doesn’t necessarily mean that buyers and sellers are not getting on with moving. For instance, we managed to secure four exchanges of contract on Thursday and Friday of last week. All parties asked the ‘what if’ question about completion, but all decided to proceed, nonetheless.”
However, in relation to the Rightmove figures released this morning, Jeremy continued: “Events are outpacing optimistic market reports, many of which relate to events of a month or more ago.
“We are not seeing sales or listings being cancelled widely yet. On the ground, most customers are just hoping the virus will be relatively temporary and not medium or longer-term. If employees are laid off or made redundant and businesses close, then bigger decisions will have to be made and there may be a more noticeable market correction. But at the moment most seem to be hanging on in there.”
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Marc Von Grundherr, Director at estate agency Benham and Reeves, who deals with the affluent West London and Prime Central areas also observed: “The current health crisis is sure to affect the property market in the short term and this is more than a little frustrating given that things were only just recovering from that other epidemic, Brexit paralysis.”
Marc added: “That said, those that now choose to sit and wait out the Coronavirus know that’s this is a temporary obstacle and one that affects sellers and buyers equally and therefore from a market perspective, supply and demand in unison.
“Therefore, whilst transactions may be dented in the next few weeks, those sales will simply defer to later in the year and, moreover, given the equality of caution from both sides of the deal, prices will probably not be affected much, if at all.”
Of course, as has always been the case, consumer sentiment fuels markets. Whether concerns are centred on the short-term risk of contracting Covid-19 or the longer-term worries around job security, only time will tell how much these fears will impact on what was previously shaping up to be one of the most buoyant spring markets in the last four or five years.
Follow Louisa on Twitter: @louisafletcher