The property market has had something of a torrid time of it recently; over the last ten years we have had referenda on proportional representation, Scottish devolution and membership of the European Union, we’ve also had four general elections, three Prime Ministers, the threat of a very radical Labour government and a global flu pandemic, which has led to economic shutdown across the world. Whatever next? A plague of frogs perhaps?
You can’t really blame the press for spinning out a series of articles arguing that the end is nigh financially, the property market is doomed, and prices are about to plummet by 20%. To point out that it has not happened would be a sad case of the truth getting in the way of a good story, but by the same token the truth of what is happening is far too complex to be covered in a newspaper by-line.
It is firstly well worth pointing out that the “property market” does not exist per se, any more than “the Christian Community” exists (just ask anyone who grew up in Northern Ireland); it’s a lazy cover-all term for lots of different markets, all of which are going to react very differently to the aftermath of the Covid 19 lockdown and the resulting changes.
The closer you get to markets which involve people housing themselves, whether it is in £300,000 flats or £10 million houses, the less things have changed. In the run up to March, the market was starting to recover quickly in the wake of the removal of the threat of a Jeremy Corbyn Government and it would appear that the lock-down was more like a ‘Pause’ button than an ‘Off’ button. Stock is short, vendors are conspicuous by their absence and the existing stock is being snapped up pretty quickly.
This shouldn’t really surprise us as considerable pent up demand had built up between 2017 and 2020 where moves were deferred, and the choice which faces owner occupiers is do they rent and pay someone else’s mortgage, or do they buy and pay their own. At this end of the market, people have to live somewhere, and they don’t appear to have gone away. In fact, the general mood amongst buyers seems to be akin to that after the break over Christmas and New Year, where people emerge saying either “I really do need a bigger house” or occasionally “we really need to go and live apart in different houses”.
The only recognisably different trend which has emerged is the swing of interest towards the country market – not as second homes, but as a real home outside of the hubbub of London. During the nine week lockdown period, an awful lot of technophobes like me have discovered how effective virtual meetings held over “Zoom” or “Teams” can be, thus finally removing the need to traipse into the city, five days a week. The agents are reporting a huge spike in interest in country properties and we have seen a big uptick of new clients looking to move out of town. Some cynical London agents have pointed out that after nine weeks of unbroken sunshine, this shouldn’t surprise anyone and the moment we revert to the usual British weather, they’ll all come back to town. Perhaps; but I suspect that things have changed and that the country market is about to experience something of a renaisance, thanks to technology.
However, for every winner, there must be a loser too and I am willing to bet that as companies move across to more ‘virtual structures’ with staff spending more time working from offices at home, there will be a move away from huge, expensive, corporate headquarters. If Covid 19 is here to stay as an annual flu, social distancing will become the norm, and trying to maintain it in a large office which resembles a rather plush battery-chicken shed, will become difficult and very expensive.
Another area which continues to look weak is the ‘discretionary’ end of the property market, which encompasses multi-megabuck penthouses for chic sheiks or oligarchs, or volumes of rental investments in modern blocks situated in obscure and often nasty parts of London, which may or may not find tenants. These are not things that anyone has to buy, merely things it might be nice to own that when the good times are rolling. This market might also take a while to come back particularly if oil prices remain low (and no-one should underestimate the effect of petro-dollars on the discretionary end of the market) and air travel remains difficult, thanks to quarantine restrictions and a massive slow-down in global air-travel.
It is as fragmented a picture as we have seen, but is certainly not what has been reported in the press. Buyers who have breezed about in the market tossing about offers 20% off the asking price have been surprised to find that not only have their offers been rejected, but that they have also been removed from the Estate Agents’ books. With an abundance of strong buyers, the agents are aggressively weeding out the timid or cheeky ones.
The 1890’s George du Maurier cartoon in “Punch” magazine features a timid curate dining with his Bishop who says “I’m afraid that your egg is off”, to which the curate replies “Oh no, my Lord, I can assure you that it is quite good in parts”.
That is as true today as it was then.
By Saul Empson.