Market forecasts made by estate agents this month estimate that more than half a million home sales would be “lost” this year because of the coronavirus lockdown, with some saying that house prices could drop by as much as 10 per cent.
Going for a song? Uncertainties over covid-19, jobs and Brexit is doing nothing for the price of houses
Covid-19 has created more uncertainty over future economic prospects even than Brexit (remember that?), and that could mean that, even after the lockdown is lifted, the housing market will remain stagnant for a time, with people unwilling to commit to making what is, after all, usually the biggest purchase of any person’s lifetime.
With thousands of redundancies being announced daily as business takes a massive hit from the lack of economic activity – the John Lewis Partnership will not be re-opening all its stores, while fashion retailers Oasis and Warehouse were the latest to announce their permanent closures today, with a loss of 1,800 jobs, on top of the 12,000 redundancies yesterday at British Airways – even the government’s furlough scheme, subsidising 80 per cent of an employer’s wages bill, together with record-low interest rates, might not be enough to encourage people to take out mortgages for new homes.
Ever the optimists, estate agents Knight Frank estimate that after a 2 per cent fall in house prices this year, buyers will return to the market next year, with a more significant boost in 2022.
Another up-market London firm, Savills, said house prices could fall between 5 and 10 per cent this year, recovering slightly in 2021 and experiencing a surge in 2022.
The housing market is just another indicator of the economy’s health, or lack of it, and is another pressure on the government to factor in when considering when, and how, to lift the coronavirus lockdown. Increased job uncertainty – such as following the credit crunch in 2008 – is something which tends to scare people away from entering into long-term loans.
And then there’s those who might be considering a home move anyway and seeking to use the weakness in the market to their advantage, holding off to see if prices will fall.
“We’ve been measuring the number of sales falling through during lockdown and the vast majority are still in place,” Miles Shiplake, of housing market website Rightmove, said during a webinar this week.
“So far, there seems to be a lot of goodwill to keep the momentum of sales going through. But, particularly if you’re a stretched first-time buyer, you’ll be wondering if your money will go further if you hold back and wait. And that’s difficult to predict.”
Who would want to jump on Brick by Brick’s house price merry-go-round in such uncertain times?
The over-riding factor, though, is employment, and security of employment. Even with tens of thousands more people being furloughed each week, few of them really know whether they will have jobs to go back to when the emergency is over – or even when that might be.
And those who lose their regular work might be forced to sell their homes, even at a reduced price, representing another potential downward pressure on property values.
One indicator of people wanting to turn their assets into cash came in figures released from the taxman, HMRC, who say that in the first three months of 2020, the number of people drawing down on their pension funds was up by 23 per cent on 2019, with the value of pay-outs up by 19 per cent.
The London housing market was reported to have lost more than 15 per cent of its value in 2019 because of uncertainties related to Brexit, something which is sure to raise its ugly head sooner or later as the realities of Britain’s divorce from the European Union kick in.
All of which suggests that public sentiment is likely to be less-than-secure.
“People need employment to buy houses,” as Shiplake said.
None of which is great news for a housing company which has been indulging in large-scale loans to build often highly speculative, high-value homes, and for whom their local authority guarantee runs out in about 18 months… such as Croydon’s Brick by Brick.
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Brexit will prove to be our salvation due to not being liable for bailing out Deutsche Bank and Commerzbank, particularly now that we finally have certainty about the date, instead of vested interests spending over 3 years trying to reverse the largest ever democratic decision.
Ah, the ‘B’ word – the undefined negotiated by the unprepared in order to get the unspecified for the uninformed. Of course, we won’t have to bail out Deutsche Bank or Commerzbank (https://fullfact.org/europe/will-uk-pay-future-eurozone-bailouts/), but let’s not let a few truths get in the way of a ripping yarn peddled by a few red tops and the Torygraph now, shall we?
Would the collapse of a couple of German Banks hit the UK markets? Yes, of course it would, as would the collapse of a couple of any other of the world’s major banks, but that’s the price of globalisation and interconnectivity. What this pandemic has surely illustrated is that relying on global trade as a panacea for being ill-prepared at home and scorning our neighbours in the EU just to prove a political point is a fools’ errand.
‘Certainty about the date’ – let’s just wait and see shall we? The ‘fat fool’ has a few more weeks to ponder whether or not to pause and rethink, and after all the pausing and rethinking he’s had so far in his management of the UK pandemic response I’m not sure anyone would bet against it. About the only thing he’s managed to get delivered ‘on time’ was young Wilfred, and even then all of the hard work was done by someone else.
Largest ‘democratic decision’? Well, it depends what you’re counting. In the 1975 European Communities referendum 17,378,581 (over 67%) voted to join; in the 2016 European Union referendum 17,410,742 (just under 52%) voted to leave – so 32,161 more, or about 10% of the population of Croydon. Hardly convincing was it? Of course, both of these votes were ‘advisory’.
Brexit as our salvation! Thanks for making me laugh; it’ll look great inscribed on a headstone – just not mine.
Flats with no outside space will drop. 2+ bedroom houses with garden will rise.