This article was originally published in Property Wire and can be accessed here.
Nicholas Maestri, Director and Head of Property
Coronavirus and the property market in a digital world
The coronavirus crisis has delivered a seismic shock to the global economy. Many economist now predict an imminent global recession. The property market is clearly not immune to this crisis. However, despite ever-tightening travel and social distancing restrictions, some innovative estate agents have found ways to sell properties to those brave investors active in the market.
Activity in the UK property market has collapsed in recent weeks. Even before the lockdown was imposed, people had become increasingly disinclined to view properties, given mounting fears about contracting the coronavirus. International buyers were also unwilling or unable to fly to the UK to view properties, due to tightening travel restrictions and flight cancellations.
A few adventurous investors are still active in the market, perhaps mindful of Warren Buffet’s advice to “be fearful when others are greedy, and greedy when others are fearful”. Innovative estate agents are now arranging virtual property viewings via Skype to combat the downturn in viewings. Some agents even offer virtual reality tours of properties. Some purchasers are sending UK-based agents to view properties on their behalf.
I have seen some significant properties bought blind in recent weeks, even as the coronavirus crisis has escalated. It is remarkable to see the phenomenon of “online shopping” extend to major property purchases! Some buyers are still making all efforts to continue investing, despite the enormous economic uncertainty we now face.
Yet such investors are the exception. Most are holding their fire for now, as predictions of significant falls in property prices increase. Indeed, in the luxury London property market, a number of international investors have pulled out of property deals in recent weeks. Given the unpredictable nature of the pandemic, it is impossible to know when the crisis will pass, or how much economic devastation it will leave in its wake.
It is, however, worth remembering that property transactions in the UK increased 12.7% in the year to January 2020, with 102,810 sales completing. Such growth shows that demand is fundamentally high, which means that there is the potential for a rebound if the coronavirus pandemic is brought to a halt.
Indeed, demand is likely to become increasingly pent-up during the crisis. Some therefore predict that UK property sales and values will rebound quickly once the crisis ends. Savills says that sellers will have to remain “pragmatic on pricing” during 2020, “as demand becomes more dependent on needs-based and opportunistic buyers.” Some investors clearly sense opportunity, since motivated sellers will have to reduce their prices.
In the meantime, buy-to-let investors can take some comfort from the government’s robust economic response to the crisis. The policy of protecting up to 80% of the wages of affected employees means that most should be able to afford their rent. Chancellor Rishi Sunak says the £330 billion in new government business loans “means any business who needs access to cash to pay their rent, their salaries, suppliers or purchase stock will be able to access a government-backed loan or credit on attractive terms.” While such measures are primarily intended to support workers and businesses, they may also help to support commercial and residential property values during the crisis.
Research by estate agency Benham & Reeves found that 83% of buyers and sellers plan to return to the market once the coronavirus crisis passes. However, it is far from over yet. We have undoubtedly entered a volatile period for buyers, sellers, landlords and renters. For now, nobody can be certain when this crisis will end. Until it does, only the most highly motivated buyers and sellers will continue to operate.