The property market in England is open again after six and a half weeks in suspended animation. But anyone hoping for it to bounce back to life is going to have to wait.
In March, property viewings and valuations were banned as part of the coronavirus lockdown. Some 373,000 transactions were put on hold, according to Zoopla, worth £82bn. Perhaps with an eye on the £2.5bn in stamp duty receipts those sales would have generated, the government reopened the market last week.
Sellers can market their homes again, and buyers can view them — but much has changed. For one thing, navigating the market is now a lot more complicated logistically. Buyers have been advised to take virtual tours before they arrange a viewing. If they want to see a property in person, agents are asking them to sign a health declaration and they may have their temperature checked on the doorstep.
Once inside, buyers have been told to wear gloves and masks, not touch anything and keep a safe distance from anyone else, including pets (try explaining that to an excitable puppy). Once they have left, homeowners will have to clean all surfaces and door handles. No need to bake bread to charm buyers any more. Nothing will overpower the lingering scent of Dettol.
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All week, estate agents have been struggling to reopen their shops to new health and safety standards on social distancing. One buying agent called into an office in London to arrange a viewing, only to find the head of the branch on his hands and knees, putting masking tape on the floor.
Nevertheless, agents say demand is up. Carter Jonas claims that on the Wednesday the market reopened, telephone inquiries were 72 per cent higher than the previous Wednesday. Email inquiries had more than doubled.
For anyone trying to sell their home, this is welcome news — until they hear the offers from those buyers. Because that is where the stand-off will take place.
In the wealthiest parts of London before lockdown, Knight Frank claims its average exchange was at about 98 per cent of the asking price. The average offer was just below that, at 93.7 per cent. By last week, offers were being accepted at 94 per cent, but the average offer was much lower, at 89 per cent of the asking price.
Some buyers are after even bigger discounts. This month, the FT hosted a live Q&A session on its website with the buying agent Henry Pryor. A reader asked him how much he thought prices would drop in light of the crisis. When he said between 5 and 10 per cent, she did not sound impressed. She was looking for a 25 per cent reduction.
Working out the current value of any home in the UK is a head-scratcher, even for the professionals. In its “Red Book”, the Royal Institute of Chartered Surveyors publishes guidelines on how to value homes for mortgage purposes. A large part of the process comes down to finding what similar homes sold for recently, which is a problem. With so few sales during lockdown, valuers may need to find other evidence to make their calculation, such as talking to estate agents, says John Baguley, RICS’ tangible assets valuation director.
The difficulty in carrying out valuations is part of the reason why lenders have had to withdraw mortgage products, especially at higher loan-to-value ratios.
According to Rightmove, many first-time buyers will now need to increase their deposits from 10 to 15 per cent to get the best rates, at an average cost of £12,000. Buyers in London will need to find an extra £23,873. And if they cannot, they are going to try to talk asking prices down.
“Maybe there are up to 400,000 transactions waiting to take place,” says Peter Williams, chairman of research company Acadata. “But I suspect a lot of people are not going to be banging on the door to agents saying: ‘Let’s get on with it.’” Moving is difficult at the best of times, he says. “For anyone who does not have to move, I would have thought most people will just sit tight and see how it all works out.”
Settle in, everyone.
Nathan Brooker is deputy editor of House & Home. Find our online Q&A on the UK property market at ft.com/weekendQA
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