You cannot ignore the huge impact Coronavirus and the Government-imposed lockdown has had on the British property market. In June the Nationwide price index revealed the average house prices experienced the biggest drop since 2009, with prices falling by 1.7%. But what does this mean for the British housing market?

Lenders vs investors vs homeowners

The UK economy suffered a record slump between April and June, with the economy shrinking 20.4% compared with the first three months of the year, pushing us into our first technical recession (two consecutive quarters of economic decline), since 2009.

So, it’s perhaps no surprise that with rising unemployment rates, increasing business failures, wage cuts and future job uncertainty, that many people are cautious about making one of the biggest investments of their life, buying a home.

Although property investors are more confident than the average homeowner as they’re used to taking calculated risks, alongside their portfolio of property, they have more room for speculation.

With the view that the world will soon enough go back to ‘normal’, a reasonable bounceback is expected to be seen, but it will be more difficult for homeowners as they are on a more nervous side of the market, they will have to worry about maintaining their jobs, saving for a deposit, and much more.

For investors to carry on pushing the housing market, lenders like us here at Signature, will have to show resolve and continue to lend, following through on delivering deals on the terms first agreed, not making last-minute changes because the market has changed slightly.

Whilst everyone is unsure about the housing market in the coming years, as a lender, you must have confidence in your ability to underwrite the market and confidence the government can bring the market back to life with new incentives, like the Stamp Duty holiday in England.

It’s important that lenders take a long term view of short-term property finance and continue to support developers and landlords with the funds they need, along with residential bridging to ensure people can move without first selling their current home.

The most affected areas

There is a shining light to this, as many of us have now realised that as we can work from home we can avoid the community and the office, which is already having a big influence on the market. Figures from Rightmove, the UK property website, show a significant rise in the number of people searching for homes further away from towns and city centres, with many seeking homes with larger gardens or space for a home office.

This may not be a permanent change but it shows how Coronavirus is making many people re-consider where and how they work and live.

But unfortunately, the temporary closure of high streets has had a dramatic impact on the commercial property sector. The high street has already been decaying for years, but the virus has caused an acceleration of what we saw before, now many of us have discovered how much we can buy online and the lack of need to pop to the shops.

Previous trends showed the public wanted fewer shops but more services, the things you can’t get online, such as hairdressers, beauticians, restaurants, and cafes. Now, these services have been hit, we see a slowing of a growing trend, which means the high street has been hit twice as hard.

The result is rent arrears. Missing one or two-quarters of rent might not be a massive problem, but if this is a long-term trend we may see a fall in the capital value of retail properties or a switch in use of properties, with more set for conversion from retail to residential.

Although the Coronavirus pandemic has caused a massive shock to the property market, it may well just be speeding up changes that were already taking place and when some semblance of normality returns, the market will have endured, as it always does.

Wherever you are on the property journey, Signature has a flexible short-term property finance product to suit, whether it’s a bridging loan or development finance, we’re always worth a call, as we always follow through with deals based on the terms first agreed. And not everyone can say that.