The housing market is much easier to predict in times of confidence and certainty. However, if there is one thing we can be confident about at the moment is that we are in uncertain and unprecedented times. With all that's going on, there are undoubtedly more important things in the world to be thinking about than house prices. However, housing in the UK continues to be a major source of intrigue and anxiety, especially in times of crisis, with many wanting to regularly monitor the impact of events on the major asset and secure space that is their home whilst others just want to know, is now a good time to buy?
With our Bristol-based estate agency now working fully remotely, barely an hour will go by for our staff at home without conversation turning to a question of just what will happen to the housing market and prices? We are writing this very early on in the grand scheme of what this Coronavirus may turn out to be. Predictions at such an early stage of a crisis of this magnitude are hazardous, so the answer to the key question is that we just don't know. Any estate agent that professes to have a definitive answer to that question, in my view fit firmly into that stereotypical mould that the good ones amongst us are trying to move away from, the kind so cleverly portrayed in sit-coms like 'Stath Lets Flats'.
However, what we can do is have a look at what has happened in the past and as estate agents can try and analyse and digest the feeling we get from spending our days speaking to buyers, sellers, viewers and 'Rightmove scrollers' alike, along with professionals such as conveyancers, mortgage brokers and other professional estate agents, to put together some possible scenarios of what might happen next...
1. More Houses Immediately Come to Market Once Lockdown is Lifted
A well-exercised annual strategy from the more astute of estate agents revolves around a launch event around Boxing Day every year to accommodate for a rush of property coming to market just after the Christmas break every year. Part of the main thinking behind this is that when people spend the most time in the home, there follows a time of a lot of activity as people realise they need change.
So with people spending a period of time in their homes, the like of which has never been seen before and hopefully won't be seen again, surely there will follow a time in which many then decide the need to make a change. With perhaps added anxiety of this crisis retuning, there could be a big push for people to sell up and move to somewhere more suitable for comfortable self-isolation or just somewhere more impressive to showcase their Instagram videos of kick ups with a toilet roll.
The result here could be a big influx on the supply side of the UK housing market as people list for sale the properties that have become so familiar to them over the past weeks or months.
More specific to this unique scenario we find ourselves in but not completely alien to the post-Christmas rush is also a realisation for many that they may need to be closer to loved ones or, a likely unfortunately impact of this economic pressure; a need to release funds due to financial circumstances. Some even point at the rate of separation and divorce going up after more time together at Christmas and resulting in more houses coming to market. Whilst so many love to follow the warm and positive stories of humanity pulling together and TikTok Videos of famous couples dancing about their swanky kitchen/diners, the consensus is that there could be several houses coming to market after all of this, the proceeds of which will be going separate ways.
2. More People Rush to Buy 'Normality' Returns
Linking-in with much of the above, the time spent at home is likely to drive people to look closer at their living quarters and explore what homes are available to buy. Added to those reasons to move listed above are the many in the situation of living in rented accommodation, bringing its own uncertainty in a time where a secure home has never been so important. For those also living in close quarters with family for a prolonged period, this may be motivation enough for many to try and get onto or return to 'the ladder'.
On a more immediate level, the amount of time people are currently spending online and on apps will be driving people to sites like Rightmove and Zoopla as well as to social media posts from estate agents, home stagers and influencers. All this activity adding to hubub around property which could in turn lead to a swath of prospective buyers pounding the streets, once viewings and visits to properties becomes possible once more.
The demand for houses in Bristol and many other major UK cities was higher than it has been for many years during the months of January and February, with a feeling of Brexit progress and post-election optimism, rightly or wrongly, triggering many people to see it as a safer time to make their big purchase. With several factors adding to this likely demand, the housing market could swiftly return to a level where demand is again at this level, if not much higher with the result on house prices likely to be a rise.
With the Bank of England interest rates at 0.1%, there is also potentially a crucial financial aspect to this, with those who have weathered a storm able to then make the most of some very attractive rates to borrow. With money potentially easier to access and banks keen to attract new custom after a rocky period of time, there may be buyers who wouldn't have otherwise, encouraged to look, seeing it as the right time to do so financially.
Also for investment buyers, who might otherwise have put their money elsewhere, the floundering global stock market may drive many to see property as a safe place for their money, especially in major cities. So this may also bring a different type of buyer onto the scene, those landlords who had previously been driven away by an increase in stamp duty and a change in tax relief.
3. Fewer Buyers Due to Financial Issues and/or Caution
As much as the interest rates, amongst other factors may encourage some to buy, there could also be see-saw in the other direction. Rates are set low for a reason; the economy is struggling. Social distancing and isolation measures designed to combat the virus are obviously just not compatible with a bustling and busy economy. Just how much the global and national economy is hit by this crisis is still to be seen, but in any time of economic crisis, the housing market is hit. In 2007 and 2008, the recession is said to have hit the average UK house by 20% of its value.
Without being knowledgeable enough to go into the macro-economics of it all, its best to focus on what estate agents saw then and are seeing now on the ground at this time and what is likely to be repeated as a result of these challenging times.
We have unfortunately already had a few buyers contact us to say they are having to rethink their buying options due to a change in their income or employment for the worse as a result of the virus.
This virus is impacting everyone, but some far more than others. For those affected the most, buying a house sadly and understandably just isn't going to be on their radar, whether it was or not before the virus. Unemployment will likely rise and a recent a BBC article predicted 20% of small businesses would struggle to survive this crisis. For those involved with setting up and running small business it is bound to be a troubling time for them and their employees, affecting their living situation. For many cities, none more so than Bristol, independent small businesses makeup key part of the local economy, culture and character, whilst some big towns in the UK rely heavily on the success of one major employer, so this may hit some areas more than others depending on how business fairs.
For others, the stories in the press and from friends of financial hardship, even if not realised by them directly, will bring with it a great deal of caution that could well prevent people wanting to enter into property transactions. This impact on demand could see fewer competition for those wanting to buy but if widespread, could see prices fall.
In the short term, mortgage companies have responded to the uncertainty by temporarily withdrawing products to anyone applying for a larger new mortgage. However, this is just a temporary response, as many are keen to stress and hasn't effected existing mortgage offers and is unlikely to last long as the lenders re-work their other products and offers to suit the current climate.
The recession of 2008 didn't hit housing as much as some markets and it didn't hit some areas as bad as others, but there unfortunately can't be too much complacency or comfort drawn from patterns of the past in unprecedented times.
4. A Rush of Activity in The Short-Term but Long-Term Concern with Other Challenges on the Horizon
The impact of this virus and the subsequent response is likely to be long-lasting. It could well be that as we have suggested above, there could be a surge of home-movers, in a same way there will be a surge back to the pubs and a surge to thank the healthcare professionals who have worked so hard caring for us and our loved ones. However, there will also be a mid and longer term repercussions for the solutions recently offered up by the government, banks and businesses aiming to keep the economy stable in the short-term.
Lower rates and a potential increased supply of houses may transaction levels after the virus increase markedly, as we've suggested. However, in the mid to long term, there is likely to be a major impact on the national and global economy as it goes through a period of analysis and repair in years to come. This is likely to mean an attempt to claw back some of the money spent and rebuild strength and confidence in the economy. For the housing market, this may mean a lingering or even growing feeling of caution, after an initial flurry, with concerns over affordability and an inevitable slowing of demand or drop in prices.
Should the cost of living rise and income not follow suit, house prices are not going to be able to keep increasing how they have in the past. Whilst this could lead to house prices plateauing at a reasonable and perhaps healthy level, it could also lead to a low transaction rate and a fear of prices falling. This, like everything, could affect some areas or even districts within areas, far more than others.
5. A Stop-Start Return for the Housing Market
Rather than going from busy to slower or slower to busy, this idea stems from the likelihood that overcoming this virus and lifting the social distancing regulations are going to be quite stop-start in themselves, so the likely effect on the economy and housing market may well be the same.
Looking at China for a blueprint, people are coming back out of lockdown slowly but are potentially seeing second waves of the virus. Again, without wanting to go too far into epidemiology, until herd immunity is established through vaccine or other means, there may not be the stability we previously enjoyed without cycles of restrictions and then action. Even if 'War against the Virus', as Mr Trump like to put it, has been firmly won, there may still be a rapidly fluctuating consensus of what is a good time to buy and a bad time to buy or sell. A lot may well depend on how long our current situation continues for and how the economy fairs in its recovery once the virus has been fought off.
The market is unlikely to grind to a complete halt. Even now, with our estate agency, we are agreeing sales on properties through previous viewings and virtual viewings and taking properties from previous and virtual valuations. Indications from the past few years tell us that each time a certain set of buyers are struggle with affordability, another set of buyers will perhaps take advantage. An example can be seen in the strength first-time buyers have gained from the weakening of investment buyers through tax relief and stamp duty and the additional benefit seen through the scrapping of their own stamp duty up to £300,000. If the UK or European economies suffer then we are likely to see many more buyers from abroad buying British property, as we also saw some evidence for in Bristol when the pound fell in the aftermath of the Brexit referendum. So there should always be a way to sell your home at a reasonable and fair price, its just the person who is likely to buy it might be very different depending on the likely ebbs and flows over coming years.
There may not be a prolonged period of complete certainty and confidence in the housing market for a very long time now.
In the short term, any rush in activity may be curbed by a continued caution about social distancing having people around their house, viewing properties and meeting strangers but this could surge with buyers confidence once the feeling changes, only to be stunted again by cautiousness about buying in general and the underlying financial position - and of course, one person's idea of when it is a good time to buy, may not match up with a lot of others.
This option could be seen as an 'All of the Above' but perhaps happening sharper spikes and falls than we have seen before, depending on the fluctuating confidence and an ever-changing response to the virus and reaction of the economy for many years to come.
6. Lower Estate Agency Fees in a Price Sensitive Market and the Growth of the Hybrid Agent
Away from the speculation about house prices and transaction levels, there are some things we can more accurately anticipate. Born out of the last recession was a shift in how estate agents choose to work. The industry was forced to adapt and, in an age of increased online transparency of fees, there has since been unsurprisingly been less popularity for those agents who charge an extortionate amount, yet refuse to offer more than what they do.
In a price-sensitive market, sellers are going to be keeping their eye out for estate agents who can do the best job at the lowest price. From this we may see many more online estate agents attempting to take centre stage and sing us familiar a solo about all they can offer for next to nothing. Yet as many sellers have found out, money saved on their fee is likely to be money lost on the sale price or on hair replacement with all the stress from poor service. The sensible bet is that the agents that will flourish are those offering a complete service at a competitive, and often transparent rate. This could be high-street agents who are able to adjust their expectations on what they make from each sale whilst wisely managing their previously costly overheads. Otherwise this is going to suit the hybrid estate agents who are already set up to provide a comprehensive full service at a much lower price.
In times of financial uncertainty, estate agency fees are an area the public will earmark to make a saving when selling, but it will be value that they are looking for and the security of only paying when they have the money from the sale, rather than just the cheapest headline fee.
7. Increased Use of Technology. Flexible Working for Estate Agents and Flexible Viewing for Clients
In the very short term, whilst all this is going on, there could be a major shift in culture towards remote or virtual viewings and valuations. Obviously there are big obstacles when both agent and prospective buyer can't visit a property, but when there is no other option but still a demand, there will surely still be some sales being agreed. The longer this goes on the more of a cultural shift there will surely be towards making such big decisions on a predominantly virtual platform.
In the mid-term, everyone will likely revert back to traditional physical visits as soon as it can. However, people are unlikely to forget the time their eyes were opened to the possibilities of technology. Just two weeks ago the word 'Zoom', for example, was just something you did on you a group picture to pick out your mates gormless facial expression, but now the US video call company is a household name across much of the developed world.
With the threat of a global pandemic proving it can be a reality rather than an apocalyptic fiction, the smart agents will be spending time continually improving their ability to take-on and sell property remotely, whilst buyers and sellers will be increasingly open to using these tools of the trade. The smarter agents still will be remembering this time and using tools such as Zoom, Facetime, Matterport and Video Tours to enhance their standard service further, regardless of any further pandemic or global fallout. From our experience and fairly extensive preparation for this current situation, Matterport is by far the best of these tools at the moment and one which Boardwalk has offered for free to all our available properties as we approached this crisis. With a 'virtual reality' version of all the tours available to those who have headsets, as VR becomes more common and more competitors come forward for slightly smoother versions of interactive virtual viewings, could this be what the future holds and what really shakes up the standard process of feeling one has to view in person to offer?
Technology is definitely becoming more and more central to the lives of most of the public. As a result, their needs and demands will change within their house search. More subtle changes will likely creep their way into the way estate agents are marketing property, such as home internet speed rather than commuting distance to the office and the advantage of empty or unlabelled space in a potential new home, providing room for virtual reality gaming, exploration and exercise. Visual representations of properties need to be impressive, accurate and available at the click of a button. All digital marketeers will tell you now that video is king. So much so that I nearly did this as a video blog but realised I wasn't made for the camera, hence why I've written this now fairly length essay of potential scenarios and speculations, but thanks for reading and we'd appreciate your thoughts and musings. Get in touch via our website, Facebook, Instagram or Twitter with Boardwalk Property Co.