The biggest impact of Covid-19 on the housing market is likely to be on transactions, rather than prices, according to Savills.
After an animated start to the year, there now seems an inevitability that we are in for a period of low transactional activity, not least because of the effects of the lockdown, even if partially lifted, on the practicalities of buying and selling homes. But the case for a widespread correction in prices is somewhat weaker assuming projections of a V-shaped economic downturn and subsequent recovery prove correct, the firm’s researchers say.
As far as the mainland goes, at the end of last month Savills research predicted that this year’s housing transactions are likely to be between 37 per cent and 52 per cent lower than last. The evidence of the past few weeks has entrenched that view, including Zoopla reporting that the number of newly agreed sales has fallen significantly since the Coronavirus restrictions were put in place. With the number of new enquiries falling by 60 per cent.
Similarly a recent RICS housing market survey showed that both new buyer enquiries and new instructions had fallen significantly in the second half of March, with the vast majority of agents seeing enquiries and instructions fall.
Interestingly, unlike any previous downturn in the housing market, the figures for new buyers and new instructions have fallen in unison. This means that, while both supply and demand are heavily subdued, there isn’t currently evidence of the kind of imbalance between them which has been the catalyst for significant price falls in previous downturns.
Richard Fox of Savills Guernsey said: “In the coming weeks, low market activity is likely to make it relatively difficult to establish what has happened to prices, meaning this is only likely to become clear as we come further out of the lockdown and transaction levels start to pick up. Even then there will be a period when buyer and seller expectations take time to align.
“However we believe from a pricing perspective, there are five key factors that differentiate the current position from, say, the recession of the early 1990s and the repercussions the credit crunch in 2008: the causes of this downturn are entirely different; the relatively low levels of price growth in the run up to current events; the fact that we are starting from such very low interest rates; the States’ swift response to protect jobs and earnings over the short to medium term; and lenders’ flexibility around mortgage arrears.“Whilst we won’t be able to fully see the effects of Covid-19 on the market at this stage, we are thankful that Guernsey has worked tirelessly to contain the virus and we are now able to affect a limited return to conducting appointments and concluding sales, in accordance with the States’ guidance, after only a one month hiatus. Our time away from viewings has been well spent, our team have stayed in good spirits and have even been able to negotiate several sales up to £1.5m, and kept in touch with our applicants. We have a significant number of buyers in a position to act immediately and we are well positioned to help anyone still considering selling during the summer months.”