Property market reacts with uncertainty to Covid-19 pandemic
The strength of underlying demand suggests activity will rebound as restrictions are relaxed
2 minutes to read
The Covid-19 pandemic has unsurprisingly caused buyers and sellers to explore their options. Initial feedback from agents across the UK suggests that viewing levels fell quickly in response to the government guidance on social distancing.
Buyers and sellers are understandably cautious in such unprecedented circumstances.
How long current guidelines remain in place is uncertain but there is no doubt that the residential property market had been in good shape following December’s general election result.
Demand subsequently strengthened and as recently as last week (ending 14 March), the number of new prospective buyers registering in London was 16% higher than the same period last year. In March 2019, the country’s biggest concern was the impending Brexit deadline.
The UK’s prime country house market is experiencing slower conditions, although new buyer volumes last week were only down slightly (-4%) on levels seen in recent years.
Prices haven’t been rising but prime and mainstream markets had begun to stabilise, albeit at different rates depending on location and price bracket. This followed several years of tax changes and political uncertainty.
For transactions underway, some are going ahead as planned, some have been paused and others have halted altogether.
There is also some uncertainty over the logistics of the moving process and the speed with which conveyancing can take place.
This mixed reaction to events reflects how people don’t yet know how to respond to something so unrelated to the underlying fundamentals of the property market.
One buyer in London pulled out of a deal on Friday and re-submitted an offer on Monday when the property subsequently attracted interest from other buyers.
As one agent put it: “People are looking for a new norm.”
The strong market fundamentals suggest it is likely any response will also be rapid when current government measures are relaxed or lifted. Boris Johnson said on Thursday the government could “turn the tide” within 12 weeks if social distancing measures are adhered to.
Prime central London property is now priced at an effective discount of 42% in US dollar terms since the middle of 2014. Furthermore, the base rate is as low as it has been since the Bank of England was established in 1694.
Some economists say a V-shaped recovery in the wider economy is more likely when responding to such external events.
The journey the residential property market has been on in recent years and the fact it had entered recovery mode must increase the chances of such a response.