The latest on the housing marketMay 14, 2020
ILM corporate partner Berrys gives the latest update on the property market following the government’s announcement earlier this week.
The statement from the Prime Minister on Sunday 7th May engendered some optimism about the restrictions on personal and commercial activity would steadily start to lift. There was undoubtedly hope in our office that the property market may be allowed to function again in the usual fashion in early June.
Our optimism was further increased with publication of the Government’s suite of guidance documents on Monday 11th setting out in more detail the guidance for working in various situations. Of most relevance to surveyors and property agents being the guidance for “Working safely during Coronavirus (COVID-19) in other people’s homes”. We were getting to grips with the need for creating a risk assessment as required by the guidance for working in occupied properties when the announcement was made on 12th May that the housing market could reopen with all visits needed for the operation of the market to occur on Wednesday 13th May. Updated guidance on moving has also been published here.
The announcements following in such quick succession meant there was little time to prepare for either agents or surveyors. Many staff are on furlough, with systems and offices not ready to reopen at short notice. The speed of the change from the market being fully closed to fully open will also cause some anxiety amongst those who are unsure as to whether or not they wish to undertake or, indeed, allow visits to other’s homes at this stage of the pandemic.
We can at least move forward with sales and purchases and all necessary activities related to the housing market. However, there is still the requirement to meet the safety precautions set out in the guidance documents, principally for maintaining social distancing and hygiene, in addition to undertaking risk assessments of both the service provider and the property occupier.
In those situations where a physical inspection is still not possible, then a desktop appraisal with a physical inspection at a later date may assist with early decision making. The validity of a valuation without inspection is, however, closely related to the nature of the property and amount of information available and should be considered on a case by case basis.
Prior to the lockdown the housing market was seeing an increased pace of sales and general levels of activity and there was optimism over 2020 being a busy market by recent standards. Reports throughout the lockdown period have indicated a pent-up demand for house moves and new houses remains.
Drop in values
However, the housing market relies on confidence and buyers’ belief that the property they buy will steadily increase in value and be affordable. Recent media commentary has centred around the potential for a drop in values of between 5% and 30% and for increased unemployment. It is possible that early entrants into the market may look for a “risk premium” to allow for a market adjustment and price falls will become a self-fulfilling prophecy. If buyers return to the market in sufficient numbers, then this will be a short term phenomenon as competition should minimise price reductions.
The lockdown period and this transition phase are likely to prove to be a particularly challenging time for valuers. There is, sadly, going to be a higher than average number of IHT valuations that need doing and assessing value of property during a period when the market was not operational will require some highly subjective judgements. I suspect that hindsight will prove to be very useful and the activity in the market during the transition phase may be projected backwards into the lockdown period as evidence of value at that time.
For those bringing property to the market there could be decisions to make as to whether to accept early offers or to wait for a longer period to ensure that they are not falling prey to the bargain hunters. As ever, the basic principles apply in that the agent must ensure that offers coming forward are from buyers who are in a position to proceed and that they will be able to access loan finance if this required.