How will coronavirus affect the housing market? Mar 17, 2020Views: 171
Coronavirus is sweeping the world, and this week, the UK ramped up its action plan to try and delay the spread of the disease. The impact on the economy is unclear, and many people are worried about the effects the health crisis might have on the property market.
Brexit and the general election were the dominant news items for many months. However, the majority result for the Conservatives in early December led to the 'Boris bounce' - a general upturn in the housing market. This is now likely to be inexorably challenged by the onset of Covid-19. The global stock markets saw their steepest downward trajectory since 2008. Thursday was the worst day for the markets since 1987. The FTSE 100 index was decimated by 10.87%, while the Dow Jones ended the day with a 10% loss.
Will Covid-19 harm the housing market?Although fears of the coronavirus have been widely reported since November, there has been little impact on the property market to date. Benham and Reeves, an estate agent in London, reported that it had had a higher rate of transactions in the last quarter than in the last year, probably as a result of Brexit uncertainty. The property market, in London at least, is strong as buyers and sellers feel released from the constraints of the last few years.
RICS' recent residential markets survey also offered some good news. It depicts house prices rising at their fastest in almost four years in February. The entire UK saw rising house prices, although prices rose more in London, the Humber, Yorkshire and East Anglia.
How coronavirus can be compared to Brexit
Although the results of the EU referendum caused a few short-term fluctuations in the housing market, the long-term trend was for house prices to continue to rise in the following years.
Last week the government informed the country that it expects the peak of coronavirus cases to be in a few weeks, which is a short time by any measure. Scientists around the world work to provide answers and a vaccine against Covid-19, and many believe that the effects of the disease on the markets will be short-lived.
Gary Barker wrote in Forbes that he expects the global economy to be resilient to the pandemic. History shows that markets usually bounce back quickly, although initially taking a hit at the time of an outbreak.
He compared the swine flu epidemic of 2009 ich affected the UK in April, although not on the same scale as coronavirus. It did have a significant economic impact but house prices still increased by 10.1% between 2009 and 2010.
If the impact of coronavirus follows previous economic trends, estate agents, sellers and buyers should not be too concerned. The economy surged in January because of resurgent consumer confidence, and this is unlikely to suddenly stalls because of a virus with a very low mortality rate. If the situation deteriorates, however, this outlook may have to be revised.
The short-term impact
Nonetheless, some areas of the property market could be affected. Some people's employment and income may suffer as a result of the virus, which would obviously make them less likely to invest in property.
While fears remain about contagion and social isolation policies are in force, people may be unwilling to view houses. For overseas investors interested in UK property, flights to the UK are looking extremely problematic at the moment.
Technology may be able to play an essential role in keeping the housing market active. Many estate agents may allow employees to work from home to stop the contagion from spreading to vulnerable people. Video conference calls and photos can be used for valuations and viewings - virtual reality headsets can be invaluable for a realistic viewing experience.
There are plenty of inexpensive technological solutions now available in the property sector that allow people to work remotely. Landlords can use apps to keep in touch with tenants, for example. These days, even important paperwork, such as contracts can also be sent and signed electronically using secure apps.
Unlike many other economic areas, such as the wedding industry and the holiday market, the property sector is expected to ride the coronavirus crisis intact.
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