A look at the Economy, Coronavirus and Buying in 2020
The last few months living through this pandemic have been an absolute rollercoaster for many and an eye-opener for the property market. From coming to an almost total screeching halt during the first 8 weeks of lockdown, the property market in London has picked up dramatically and we find ourselves rushed off our feet.
People are buying and selling in increasing numbers every day, or so it seems! So, what is causing this rapid increase, is it sustainable, and fundamentally is now a good time to buy?
These are some of the questions I hope to answer for you here.
For the first 8 weeks of lockdown the property market was totally paused. No house moving was allowed at all - transactions stalled and many people were left in limbo with their purchases/sales. Everyone was stuck at home… I mean, you remember it! It wasn’t long ago!
As lockdown started to ease, all the people who would otherwise have agreed a sale or put their house on the market over the preceding 8 weeks all came to the market at once with some big intentions and they went out and made some deals happen. Those people had already spent time, and often money on the preliminary processes of buying and selling - they’d taken advice from a broker, painted the kitchen and landscaped the garden - they were ready, so they moved fast! Wouldn’t you if your plans had been put on hold for a solid 2 months?
The next wave of people to the market were all those people who had realised that the space they currently occupied was no longer right for them whether renting or owning. Did they need more room for a home office, some outside space to relax in or just a new location given that they no longer needed to be quite so close to work? Again, to me it is not surprising that these people acted quickly and continue to come to the market now as this ongoing pandemic changes life in immeasurable ways.
So, in the grand scheme of things I don’t think it was a rapid increase as such, more just what it looks like when 2 months worth of desire to move house has to happen all in one go!
Well, people always need to move. Families grow, new jobs happen, people relocate and people find themselves in new life situations and need somewhere new to live. There will always be demand for property regardless of how bad the economy really gets. In the aftermath of this pandemic we will see an increase in the work from home lifestyle, with people then needing more space and also choosing to live in a place they like better since they will be spending so much more time there.
Let’s have a look at the economy though… what is really going on there?
We are now in a recession, yes, but it is important to distinguish between our current situation and that of a more typical recession. In the UK we are considered to be in a recession as soon as GDP dips for 2 consecutive quarters, so, because the economy dropped in Q1 by 2.2% and then in Q2 by 20.4% we are officially in a recession.
Historically, recessions mean that property prices dip because more people are out of work, there are fewer people looking to buy and so competition softens. However, our current recession is a bit different. For one thing, this was a calculated closing of the economy by our Government. GDP was always going to fall when millions of people were told not to go to work, industries were told to temporarily shut down and people were told not to leave their homes even to spend money. Now that the lockdown has eased, and continues to ease further, the expectation is that people will start to spend again, the economy will slowly return to normal and property prices will remain on an even keel.
The Government has put plans in place to ease the effects of the lockdown (and the current recession) by offering furlough to millions of people in the UK who couldn’t continue working as normal whilst the pandemic raged. They’ve also input measures to boost the economy further; VAT savings, a SDLT holiday for home buyers and various schemes to support business owners and to encourage regular spending again. Even though Q2 has involved a drop of 20.4% total, May and June both saw the economy grow from that low point as the country began to open up.
There is some really positive news out there about the economy in general and the property market in particular. Sales are up by 20% and the property market had its busiest month in 10 years in July. The Economic Research Institute has predicted that the UK will have bounded out of this recession by the end of the year with an anticipated 15% growth in July through to September.
If anything, people’s plans to stay at home more, fewer opportunities to travel or live abroad (not least impacted by Brexit) will I think make this new approach to searching for the right property a more permanent feature in all our lives. If people stay in the right property for longer periods of time before moving again, we’ll probably find that supply gets lower and demand increases over the coming years driving property prices higher as well!
Ultimately, if you are someone whose job still exists, you are through the worst and the company you work for has survived. Thousands of people are sadly out of work or at high risk of being so, but if you are here reading this article you are probably in the lucky position of being in a secure job.
You’ve potentially even been able to save during lockdown due to reduced daily expenditure such as commuting, lunches out, going to the pub and fun stuff to do on the weekends. The Stamp Duty holiday running until March is going to save you a packet when you come to buy and you will probably find yourself paying less on mortgage payments than you do on rent in London for somewhere half decent! Why not look to buy now and get yourself somewhere you’d be happy to be locked down in if 2020 happened again?
It is completely understandable that potential buyers may be feeling more cautious at the moment given the increased job uncertainty, our current recession status, coming out (hopefully) of a pandemic and the fact that various lending standards may become tighter. Even if the market was to dip again in the near future, you weren’t planning on flipping your new home in the first year you own it anyway, so who cares? Just ride it out in your lovely new flat, close to a lovely park, with a balcony and study of your own!
We think knowledge is a powerful resource... so if you’re unsure whether you should be buying now, why not have a chat with us about the market, your hopes and dreams and your buying options.