Will my house sell as fast due to Coronavirus?
With the potential for hundreds of thousands of job losses in Britain this year due to COVID-19, it seems inconceivable that the housing market will not take a hit in the short to medium term, meaning the value of your house may drop for the first time in over a decade.
Has lockdown affected the housing market?
Even before the government put us into full lockdown on 23rd March this year, the housing market was ahead of the curve, with a big drop in viewings and valuations, as people started to understand the impact of Covid, after seeing what was happening in Italy in particular.
Inevitably, activity in the housing market ground to a halt as full lockdown was implemented. Not only was it physically impossible to show potential buyers around properties, but sentiment understandably took a turn for the worst. Sales that had already been agreed, started to fall through when confidence took a nosedive as people started being put on furlough and wondering whether they would have a job to return to at all.
It wasn't just buyers that started to worry and withdraw from purchases, with sellers deciding to stay put too. When the economy looks uncertain, people tend to delay big financial decisions, with none being bigger than buying or selling your home!
Has lockdown affected the value of my house?
This is a tricky one. We are currently in what is known in the industry as the PDP or price discovery phase as buyers and sellers struggle to determine the value of home in the post lockdown economy.
The average asking price in the UK was £245,000 before lockdown, it's since risen to £280,000. This is largely due to the perception among estate agents that there is pent up demand for viewings and therefore increased demand. However, purchasers are having none of it! Some 79% of buyers who had already agreed purchases before lockdown, have asked for price reductions. Sellers are not playing ball. Only 2.5% of these price drop requests being accepted.
Data released by Nationwide last week suggests that house prices dropped by 1.7% between April and May, the biggest monthly drop for over a decade, wiping £4000 of the average property.
A note of caution, these statistics are based on a very low set of transactions. Less than a fifth of the normal number of transactions occurred in April.
What will happen to house prices in the future?
It's generally accepted that figures for the last few months are really meaningless in terms of giving us a true picture of the state of the market, due to how few transactions have actually taken place. There are a few factors at play that mean we won't understand where things have landed for a few months, at least.
I'll explain why. Sellers only reduce their price substantially if they're forced to sell, if they're unemployed and can't afford their mortgage, or are hard up and struggling with debt. As long as the furlough scheme is running, people are remaining employed, with less opportunity to spend their money, some are actually managing to save and feel wealthier than normal! Interest rates are also at rock bottom, so mortgage payments aren't about the shoot up anytime soon. Because of this, it's a fair assumption to expect house prices to remain flat for most of the rest of the year.
However, when furlough ends and the damage to the economy becomes apparent, with large scale redundancies, things will probably start to change.
The Centre for Economic Research (CFER) said on April 14th before the chancellor launched the furlough scheme, that they expected house prices to drop by 14% by the end of 2020.
They have now revised this to a fall of 8.7% by the end of this year. Kay Nuffield, head of macroeconomics now believes that “we will see a gradual decline in prices”, followed by more of a cliff edge as the job-retention scheme comes to an end and job losses start to really bite. This would lead to a fall in income and therefore demand in the housing market.
Economic predictions can be famously inaccurate (Brexit ‘crash' that never happened, “Britain would be poorer if we didn't join the Euro” etc.) and honestly, are generally little more than guesswork, so take the above with a pinch of salt.
What's the best way to sell my house fast in the current climate?
The only way to guarantee a fast sale (by fast I mean the cash in your bank in around 7 to 28 days) is to sell to a cash buying company. This is still a relatively new part of the property industry here in Britain but is more established in the States, where they are predicted to account for around 40% of all house purchases by the mid 2020s. The cash buying company will make you an initial offer online, assuming you accept it, they'll then get it formally valued and surveyed, as well as legal work, but all done in super quick time.