It is certainly a tale of two lockdowns when we consider the impact of the COVID-19 pandemic on the housing marking and estate agents in particular.
As we hit the first national lockdown in England from March – May 2020, experts predicted a 10% slump in house prices and an industry in big trouble. However, once the housing market reopened and the Chancellor announced a temporary reduction to stamp duty rates making homes under £500,000 completely exempt from stamp duty, this coupled with a backlog of properties and new buyers who had been unable to proceed in the intervening months led to a significant rise in both property transactions and house prices.
With property portals Zoopla and Rightmove reporting their busiest sales and highest house prices in August 2020 for 5 and 10 years respectively and Nationwide announcing a year-on-year rise of 5.8 per cent for average house prices in October 2020 the market has remained buoyant despite the end of the more generous furlough scheme on 31 October.
Indeed, such is the current appetite for buying and selling properties – prompted by the rush to process transactions prior to the reduced stamp duty deadline of 31 March 2021– that many estate agents are only prepared to offer viewings to serious buyers (i.e. cash buyers and those whose homes are already under offer) and estate agents, conveyancers and mortgage lenders are struggling to keep on top of the demand.
There has also been a significant rise in the popularity of online agents. No longer just for the budget conscious vendors who are prepared to roll up their sleeves and get actively involved in the process of selling their home for the trade-off of an impressive cost saving, vendors and buyers alike are attracted by clever technology which already allows for virtual viewings and 24/7 communication. A one-off set fee is also an attractive option in uncertain economic times, with some agents even offering a no sale, no fee or completely free of charge estate agency service, making their money through optional extras.
But what impact will we see from Lockdown part 2, taking place from 5 November – 2 December 2020? And whilst we are still seeing a boom in the market as a result of Government incentives like the stamp duty cut, the furlough scheme, job retention bonus for employers and the VAT cut for hospitality and tourism companies, what happens when these incentives end in Spring 2021?
In terms of the second lockdown period there is expected to be less of an impact this time around, with the Government confirming early on that the housing marking would remain open in England* with adherence to COVID-19 safety guidance. Robert Jenrick, Secretary of State for Housing, Communities & Local Government, confirmed that:
- Renters and homeowners will be able to move
- Removal firms and estate agents can operate
- Construction sites can and should continue
- Tradespeople will be able to enter homes
For estate agents, this means following the Government’s latest guidance on COVID-19 for employers and businesses whilst also following agent specific regulations. This includes virtual viewings only in the first instance until a buyer has a serious interest, regularly checking to see if any party has COVID-19 symptoms or is self-isolating before going ahead with face to face viewings, valuations or meetings and operating an appointment only system.
This relaxation of social distancing in comparison to the first lockdown will allow the market to continue to flourish as the rush to beat the stamp duty deadline continues. Estate agents and mortgage lenders are still seeing a high demand for property sales in the final quarter of 2020 and lenders are at their busiest since 2007.
However, we may begin to see the housing market stall in the not too distant future as we start to feel the economic impact of more Covid-19 restrictions coming into play. Unemployment and redundancy figures are at an all-time high since the introduction of employer contributions to the furlough scheme in August 2020 and with predictions of a recession in the offing as we are fast approaching the end of Government incentives in the spring, the confidence of both lenders and buyers is bound to be dented, quite apart from those who have been priced out of the property market completely. Indeed, industry insiders predict a drop in house prices of between 5% and 14% in 2021 until the labour market recovers and uncertainty around the COVID-19 pandemic begins to subside. Given the Government’s U-turn in regard to an extension to the furlough scheme it may be possible that they heed recent calls to extend the stamp duty cut, but there are no suggestions that this will happen any time soon.
*The Welsh Government pressed pause on house viewings during Wales’ most recent firebreak lockdown from 23 October to 9 November and Scotland are yet to declare the impact of any potential further restrictions on the housing market.