Is There Any Good News for the Post-Lockdown Property Market?

The Covid-19 pandemic has created a lot of uncertainty in the intertwined financial and property markets. With the UK in lockdown and business as usual suspended for most, buyers and sellers of both commercial and residential properties have been left in limbo, unsure how prices will be affected or what the landscape will look like as things return to normal. So what might we expect from a post-lockdown property market?

Property in Lockdown

Whether you’re buying or selling, chances are there have been hold-ups or a suspension of the process. With estate agents limited in the work they can do and completion dates delayed, the property market has been left in stasis. The current situation has led to lenders becoming far more wary about who they will provide loans to, creating the very real danger that a lack of available credit will cause the market to freeze over. That could be one of the determining factors when it comes to post-lockdown property prices, and whether they stay static or collapse completely.

As people struggle financially, the banks are likely to see bad debts from both domestic and commercial customers increase in the coming weeks and months. Companies about to go bust may be unwilling or unable to pay their rents, which in turn could make financial institutions more cautious when it comes to approving mortgage applications.

“Lending rates, already low, could therefore sink even further during and immediately after the lifting of lockdown measures.”

With lenders unable to get out and value properties in person, many are removing their higher Loan-to-Value (LTV) mortgages. HSBC, for instance, has just announced they will no longer be offering their 95% LTV range of products, with applications for new-build properties being put on hold until physical valuations can resume.

Post-Lockdown: Bounce or Bust?

A lifting of lockdown precautions won’t mean a return to normality overnight. Many builders paused their operations at the start of the lockdown and are only gradually returning to work, and most big developers have seen their share prices plunge during the crisis. It may take some time for building work to be fully back up and running and for property-building companies to find a more financially stable footing.

Property companies enjoying a long-standing relationship with their bank may be safe, but smaller firms, new entrants and the less experienced may struggle to secure loans. With banks less willing to approve potentially risky applications, all but the most well-established developers could have a hard time and some, inevitably, will not survive.

One thing many developers have on their wish list at the present moment is an easing of planning laws, something the government may consider as it attempts to jumpstart construction work post-lockdown.

Already in short supply before the Covid-19 pandemic, new rental properties coming to market are now down 23% on last year, so something will need to be done to address the issue.

Finding the Good News Story

To find the silver lining, UK property is still an attractive investment option for overseas investors, who could be the saving grace of the property market post-lockdown. With the Pound Sterling falling in value, buyers from abroad can now get more for their money. While things may be on pause for the time being, it looks likely that overseas investment will still be strong when things start returning to normal. It may also provide opportunities for UK-based landlords, with demand for affordable rental homes almost certain to increase once the situation improves.

If leading figures from the property industry get their way, then there could also be good news for residential home buyers. Estate agents Knight Frank have estimated that the UK will see more than half a million fewer house sales as a result of the crisis, a crippling 38% annual fall.

Calls for a stamp duty holiday are growing stronger, and could be one way of getting the property market moving again once the lockdown ends.

For something resembling normality to resume, the government, banks and developers will need to start putting measures in place now. With several more weeks of lockdown on the cards, it will take some time before we see a clearer picture of the property landscape in a post-Coronavirus Britain.