It’s easy to look with doom and gloom at the Coronavirus situation and imagine that this could be the death knell for the property market. Why would you make the biggest investment in your life at a time of great economic uncertainty? Furthermore, the government has requested that the market effectively shut down while we fight this pandemic. In the short term, will there be disruption and pressure on pricing? Yes. In the longer term, is the market doomed? I am going to stick my neck on the line and say that property is set for a strong recovery.
Before the pandemic struck there was a shortage of supply and an increase in demand for good property. That dynamic has not changed. Meanwhile supply has been interrupted and the housebuilding ‘boom’ will take some time to reignite, allowing demand to grow again.
Another reason to expect a pick up in the market is that interest rates will be held low for some time to come unless or until the economy recovers. Inflation could happen as a result of any quantitative easing or fiscal measures undertaken by the government but it’s likely that longer term low interest rate deals will be available for a while. If you are contemplating a house move, be sure to make the most of them.
Having seen stock markets trashed, investors will turn to real estate. It has happened on every occasion following a market correction and this time is unlikely to be any different.
Unlike in many previous market corrections, there is no pressure to sell and monetise assets. That means prices will most likely remain firm. Vendors will sit out the market turbulence until a property is sold rather than slashing prices to achieve a quick sale.
There must be some clouds on the horizon? Well, yes, of course there are. If banks were to get into a position where they became insolvent then this would have serious implications for the housing market. A thriving housing market does wonders for a government’s popularity so I suspect everything will be done to help it recover. There are plenty of measures ministers can change or reduce (stamp duty, mortgage interest relief, borrowing requirements and general taxation) if they want to oil the wheels.
If you have been considering a house purchase then after the crisis could well be the ideal time. Here are four reasons why you should act fast when the pandemic has passed:
1. Once the market begins to function property again, the supply and demand dynamics will fuel price rises. Those rises will be immediate and step up, there won’t be a gentle rising curve.
2. There will be vendors keen to sell and deals to be done, particularly for new builds once house building resumes.
3. A surge in short term supply and lack of recent market data to justify prices gives you the opportunity to strike quickly.
4. Although financial markets may rebound, there will be a six to nine month window for results to come in and it’s not until they show real evidence of recovery and growth that equity markets will bounce strongly. Short term uncertainty makes it a buyer’s market.
The sharp rise in unemployment that we all expect and regret will put a dampner on the economic recovery and much also depends on the availability of mortgage products and the ability of firms to pay good salaries and bonuses after the pandemic.
Should you blindly go and buy the first thing you see? No, of course not. However, if you apply the usual rules to property such as location and quality, you will be well placed to make the most of the market changes we’re about to see.
Use your lockdown time wisely; research locations whilst you’re staying indoors, map out your financial options and be ready to go. Because when the shutters go up, you may well be able to land the deal of the decade.