Coronavirus: a short, sharp shock?
Sponsored feature | Will Thomas, Senior associate, BDB Pitmans
The ‘lockdown’ imposed by the government in response to the coronavirus pandemic had a catastrophic impact on the housing market, as all but a handful of transactions were immediately put on hold. The timing couldn’t have been worse from a market perspective because for the first time in years genuine confidence in the residential property market was commonplace at the start of 2020.
Whenever there is an economic crash there has been a corresponding collapse in the housing market. That has been true every decade since the ’70s. Similarly, property prices have always rebounded in tandem with the general economy, so we can be sure that the property market will recover in close correlation with the economy as a whole, but how quickly?
The Bank of England predicts GDP falling by an astonishing 14 per cent in 2020, but also rebounding by 15 per cent by the summer of 2021 with any permanent economic damage expected to be “relatively small”, and that we would rebound from the pandemic “much more rapidly” than the 2008 financial crisis.
Various sources estimate the fall in property values between 5 per cent and 15 per cent, but also expect to see them back to pre-coronavirus levels by Q3 of 2021, and there is certainly no general consensus that we risk seeing widespread long-term negative equity.
As with the wider economy, many factors affect the property market: interest rates and the availability of mortgages, buyer confidence, supply and demand, and buying power. Residential property is also a key economic multiplier/driver for the economy so the government will be especially motivated to see the market recover, perhaps with the much discussed stamp duty holiday.
All of these factors are expected to improve quickly through the end of 2020 and with increasing momentum throughout 2021, and with the updated regulations that came into force on May 13, we already have a tentative green light to restart valuations, viewings and house moves (while still observing social distancing and PPE precautions). Although we are in the midst of an unprecedented economic shock, there are several reasons to be confident about the recovery of the residential property market within the short term.
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