When considering the UK post-COVID-19, there is much talk of the ‘new normal’ and the significant changes to every aspect of life we can all expect, from less time in the office to more cycling-friendly measures in cities.
But what impact will the enforced lockdown at home have on the property sector in general and property developers more specifically?
The almost complete shutdown of the property market throughout the crisis is predicted to cause UK house prices to fall by as much as 10 per cent this year, with many parallels to the 2008 financial crisis being drawn.
However, global real estate specialists Savills expect the severe economic shock in the immediate term to give way to a robust recovery by 2022 with a cumulative rise of around 15% over the next 5 years, in line with its forecast of November 2019.
The lockdown has caused many aspects of life to be restricted, with social distancing likely to lead a dramatic drop in house sales, from just under 1.2 million last year to around half that this year, according to recent predictions from Savills.
Clearly, how we emerge from the crisis will significantly affect the bounce-back and how quickly it happens, but most of the figures concerning property sales quote the residential market, which is an entirely different animal to that in which our typical developer/landlord client operates.
Given the significant impact the crisis has had on the economy, will we see a lack of buyer confidence as more businesses suffer the aftershocks of the lockdown and workers worry about the long term security of their jobs?
Will we see an expansion of the rental market as more people recognise that the typical modern landlord acts responsibly towards tenants and offers security of tenure, so is a very effective alternative to buying a home, despite the potential lure of a drop in prices?
Mortgages will not be easy to come by in the ‘new normal’ for many workers in the sectors most adversely impacted by the crisis and the fallout sure to follow.
Perhaps we will see a shift from car manufacturing to bike production, given the almost total stoppage of the UK car market in April with a 97% drop in sales and the recent dramatic 200% rise in the sale of bikes; but significant change takes time and renting buys breathing space.
The Government’s swift support for jobs and earnings and historically low interest rates may drive consumer demand, but strict affordability checks from mortgage lenders is likely to make life tough for buyers in the months ahead.
A look at the enquiries coming in the Signature office through our relationship managers paints an interesting picture, with auction finance and refurbishment loans the majority of a workload that has barely slowed over the last 6 weeks.
It is clear developers that purchased prior to the lockdown are accelerating the renovation and re-development of their properties, as they get them ready for new tenants, with the easing of restrictions offering easier access to the tradespeople required to complete the works.
Property auctions have continued throughout these challenging times, adapting quickly to online bidding with walk-around videos of many properties encouraging developers to get involved, recognising every crisis offers opportunities to those with the right funding.