Just when you thought things were looking up after three years of Brexit uncertainty. Now we face even more uncertainty with Coronavirus or Covid-19 in the UK! Whilst the Coronavirus outbreak is unlikely to go on for as long as the Brexit saga, how is the property market going to be affected by Coronavirus or Covid-19? Let’s take a look…
The property market is going to be affected by Coronavirus or Covid-19. This means property prices will likely go down. The pandemic will stop people from view houses, which in turn will slow the market down significantly.
Let’s take a look at the various challenges that Coronavirus or Covid-19 will cause. Plus how it will affect the property market. Then after this, I’ll attempt to provide solutions to these challenges.
- Will Coronavirus affect property prices?
- How will Coronavirus or Covid-19 impact you if you’re in the process of selling your house?
- What effect will Coronavirus have if you’ve already exchanged contracts?
- How will Covid-19 affect estate agents?
- What about your mortgage payments and how these are affected.
- What if you’re a landlord and have tenants, how with Coronavirus affect you.
- How about mortgage interest rates?
Let’s now take a look at each of these in more detail. For each challenge I’ve added my thoughts for a solution.
In my opinion yes I think it will affect property prices in the short to medium term. But by how much they are affected will depend on how long the UK (and the world for that matter) are on lock-down from Coronavirus or Covid-19.
The longer we are on lock-down, the bigger the impact on the property market and on property prices. Having said that there may be a pent up demand from the lock-down. This could mean that when the lock-down is released, the market may go mad. This may affect property prices in a positive way.
However, there’s another knock on effect that will impact property prices, which is the UK and world economy as a whole. Businesses will go bust. People will lose their jobs and it’s likely the UK and other countries around the world will go into recession. This will unfortunately knock-on to property prices, which will likely fall.
Property prices are all relative
Unless of course you were about to sell up and cash up, property prices are all relative. That means if you are selling your house to buy another, your house price may go down, but then so will the price of the house you’re buying too.
However, having said that if you are downsizing this isn’t always good. On a a down-sizing if you property value decreases, you’ll end up will less cash in the bank after buying your smaller property.
However, if you are about to move up the property market, then falling house prices are a good thing. If your smaller and less valuable property reduces in value, then the bigger and more valuable property you intend to buy will reduce too, but by a greater amount.
If you had no intention to move at all and property prices go down as a result of Coronavirus or Covid-19, then this won’t affect you in the long term. I’m sure that if I am right about property prices going down as a result of the Coronavirus pandemic, in the longer term property prices will recover, as they always do.
If you were already in the middle of selling your house, then Coronavirus may well have already affect you. There are a number of questions and thoughts on this aspect of how Coronavirus will affect the property market.
- Is your solicitor firm still operating or has it closed due to Coronavirus: Most solicitor firms will continue working through Coronavirus or Covid-19, as they can work from home. Therefore this shouldn’t pose as a problem, but it may slow-up the process as they get to grips with working away from their offices.
- Is your estate agent still operating normally: Most estate agents should also be able to work from home and be in a position to help progress your house sale.
- When you come to move to your new house, will your removal firm still be operating: This is another problem you may face and a bit of an unknown. Home-movers can’t work from home and whether they continue to operate will depend on the firm concerned. But also, if their workforce come down with Coronavirus, this may impact on the service they operate. Be patient if this is the case, but it could have a knock-on effect on the day of completion for many.
- Has your buyer pulled out as a result of Coronavirus: This is extremely possible, especially if your buyer have perhaps lost their job and can longer proceed. Or perhaps your buyers are elderly and have decided to self-isolate where moving home is not longer a priority.
- Is your house with an estate agent not yet sold: If you’re in the middle of selling your property, don’t expect many people to view your house. House viewings during this pandemic would go against the spirit of the lock-down.
- What about valuers: Due to the lockdown and for those jobs or professions that are not “necessary” in the present pandemic climate, house valuers are not an essential service. The impact of this is that even if you were to sell your home, or if you want to buy a house, if the transaction requires a mortgage, there won’t be anyone to carry out the valuation. Which means the transaction would stall.
- Problems between exchange and completion: What about problems between exchange and completion with Coronavirus with someone in the chain contracting the disease. This could cause a delay to completion and may result in significant financial implications.
Take a deep breath and put things into persepctive
If your house sale falls through, try not to let this stress you. I know that selling your house is stressful, but you need to put this into perspective with what’s going on in the world.
There are many at risk of contracting Covid-19 disease and won’t survive the infection. Selling your house and moving isn’t the end of the world and this is something you’ll be able to do further down the track. You may not be able to move until later this year or may have to be next year. But so long as you come through Coronavirus unscathed health-wise, what’s a bit of a delay when it comes to moving?
If you’ve already exchanged contracts and things get worse with regards to Coronavirus, how will this affect you if you’ve already exchanged contracts. When I wrote this article “what can go wrong between exchange and completion“, I hadn’t though about a pandemic happening!
However, if you have already exchanged contracts, you need to keep in touch with your solicitor and estate agent to make sure all is well with your house-sale-chain. It should be, but the area where it may fall down and become a problem is the move itself.
Keep in touch with your removal firm and keep fingers crossed all will work out okay on the day.
4. How will Covid-19 affect estate agents?
The impact on your estate agent you are using to sell your house should still be able to operate. Your agent should be able to operate from home and so long as they are using online marketing tools like Rightmove and their own website, your house will still be visible to buyers. Most buyers look online for their next house, so the fact that your estate agent has to close their doors shouldn’t overly affect you if you’re selling your house.
However, be aware that you may find there will be very few people looking to buy a new house currently. People are being told to self-isolate and to go on lock-down, so they are very unlikely to be house-hunting. People will be able to find properties online, but they won’t be going to look at houses (or at least hey shouldn’t be doing so), as this would go against the principle of self-isolation.
Be patient and wait
The only suggestion I have is to be patient with what’s going on. Don’t let it stress you, because as I said earlier in this article, it could be very much worse for you. Staying safe from Coronavirus is far more important than selling your house right now.
5. What about your mortgage payments and how these are affected
The Chancellor Rishi Sunak announced a huge package to help people around the UK, which is no different from governments around the world.
Within this rescue plan he included a three-month mortgage holiday. This means that you’ll be able to speak with your bank or mortgage company and request that you stop paying your mortgage for three months. But importantly, this mortgage holiday will not affect your credit rating.
This will help you to get through this if you’re off sick on statutory sick pay, which isn’t much. It will help if your company has laid you off and you have immediate cash flow problems.
If you have investment properties as a landlord, hopefully your tenants will be okay and be safe. Also, let’s hope they don’t lose their job so they are able to continue to pay your rent.
However, it’s possible you may end up having struggling tenants who can’t pay their rent. If this does happen you may find youself in difficulty.
However, the Government extended the mortgage interest rate relief to landlords too. However, where a land lord does request the interest rate relief, they must pass the saving on to tenants.
The are a few thoughts on this challenge, as follows:
- Check your landlord insurance policy: You may be lucky and have rent interruption insurance in place. If you do, and if your tenant cannot pay, contact your insurance company or insurance broker to see how and if you are able to claim.
- Do you have specific rent and legal insurance in place: Some letting agents offer rent and legal insurance. If you took out this type of insurance, you should be able to claim in the event your tenant can’t pay.
- Speak with your mortgage company: If you know you’re going to have problems in paying your mortgage(s), contact your mortgage company sooner rather than later. This way they are better placed to help you. If you are seeking the 3-month interest payment holiday this won’t affect your credit file or rating.
7. How about mortgage interest rates?
Perhaps only one good thing has come of Coronavirus, which is the reduction of interest rates. Not much of a consolation I might add. Interest rates have been cut to the lowest level ever in the UK! The second cut in interest rates in just over a week. This recent cut has brought them down to 0.1% from 0.25%.
I can’t see rates rising from this level for some time to come. This is even once Coronavirus or Covid-19 has passed.
“The Bank of England has cut interest rates twice in a little over a week to try to provide support to the UK economy, while lenders will offer a three-month mortgage holiday to homeowners in financial difficulty due to the virus.”The BBC – Coronavirus: Chancellor prepares wage package rescue plan
To close, I just want to say, stay safe. If you think you may have symptoms of Coronavirus or Covid-19 make sure to self isolate. In fact, in the middle of writing this article my daughter has just rung to say she thinks she may have the virus. Her and her husband are now in self-isolation.
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