The traditional “spring selling season” in the UK housing market has turned into a period of extended hibernation as the government’s measures to limit the spread of coronavirus put the market into lockdown.
Government advice means estate agents, prospective buyers and surveyors are barred from making home visits, ending in-person viewings as well as the physical surveys that buyers and lenders typically deem necessary before buying.
Experts predict transactions will fall by 60 per cent or more in the three months to June, with the Royal Institution of Chartered Surveyors predicting sales to drop to the lowest level seen in 20 years.
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Yet the ministerial guidance has left some buyers and sellers questioning how the rules should be applied. For example, could a sale be “parked” with legal agreements in place rather than entirely abandoned? What about the legal and financial implications of pulling out of a deal?
And — for some, the most pertinent question of all — where will property prices go next?
Can I still buy a home?
The government has said anyone wanting to move home, whether a buyer or a renter, should delay the transaction where possible while the coronavirus “stay-at-home” measures are in place.
Physical surveys are out, but homeowners wishing to get a move under way can lay the groundwork of instructing agents, a solicitor, and applying for a mortgage, in anticipation of the restrictions lifting.
Where a buyer and seller have exchanged contracts, ministers want the parties to postpone completion until the restrictions come to an end. If a deal can’t be postponed for legal reasons, “people must follow advice on staying away from others to minimise the spread of the virus,” it added.
Where a home is already vacant or no move is involved, a transaction may go ahead, as long as any removals that take place are carried out in accordance with the rules on social distancing. Buyers who have exchanged and have a mortgage offer in place for only a limited period can take advantage of a three-month delay being offered by mortgage lenders to prevent a deal from collapsing.
If you have exchanged but not completed, doing nothing brings its own risks. The Law Society has said that if completion does not take place after contracts have been exchanged due to coronavirus, “the parties not completing will be in default”.
What will happen to transactions and property prices?
Richard Donnell, research director at property website Zoopla, says the market is likely to be at its nadir in May and June, when he predicts an 80 per cent drop in transactions. “Transactions will drop below the worst of 2008, because we’ve physically stopped the market,” he says.
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The future direction of house prices is another big question for buyers and sellers. Estate agent Savills predicts a fall of between 5 and 10 per cent in the short term, with prices cushioned by low interest rates and lenders’ forbearance on arrears, which reduces forced selling.
Others predict steeper falls and the longer term impact on prices is likely to depend heavily on economic factors such as growth, earnings and unemployment.
Should I pull my property sale?
Those with homes already displayed in estate agents’ windows may be wondering whether to take them off the market. But since all sellers have been equally affected, buyers will be more forgiving of a lengthy marketing period, says Henry Pryor, an independent buying agent.
For many buyers, though, a bigger question is whether they will still be able to obtain a mortgage, as lenders have retreated from many parts of the market, including the high loan-to-value deals favoured by first time buyers and those based on irregular sources of income such as bonuses or commission.
FT Money deputy editor James Pickford will be online on Wednesday April 15 between 12 and 1pm and 5 and 6pm UK time to answer your questions about the UK property market. Post your questions in the comment section below this story.