Here at Eightfold Property, much like everyone else around the world, we find ourselves in the midst of an unprecedented situation in which a global pandemic is impacting businesses and the health of large portions of the population. In an increasingly global world, the problem has spread quickly and governments everywhere are putting measures in place to try and turn the tide against COVID-19, protect lives, and get the economy going again.
The property industry found itself in a very strong position following Brexit and with certainty restored to the market, house prices rose 3% in March on the previous year to their highest levels and there was more demand for rental properties than ever before. After a long period of uncertainty, the market was recovering strongly and the outlook for the rest of 2020 was looking very good for home movers and investors alike. The jump in rents that was predicted following the fee ban hadn’t materialised, but with landlords exiting the market, supply had begun to drop, which meant rental properties were moving quickly. The market itself was buoyant and things were looking good.
Since the outbreak of coronavirus in China, businesses have been affected and this has spread around the world along with the dangers of the virus itself. With any period of restriction or lockdown comes a reduction in the amount of money spent and earned. This leads to businesses “battening down the hatches” to ensure their survival, with fewer people being paid less, which in turn means there are less funds available to be spent. Some businesses will be severely affected during this time and many will lose their job, further widening the problem throughout the wider economy. As property affects everyone, with every person needing somewhere to live, the knock-on effects are felt strongly in the property industry.
One of the most widely discussed concerns in relation to coronavirus within the property industry is tenants being unable to afford rent. Where there is less money available, people will need to consider how to afford their bills each month, especially with the country in lockdown. The knock-on effect of this would be landlords, in turn, being unable to meet their bills. Some banks are offering mortgage holidays to allow some relief from this risk, but such arrangements will take careful consideration as to their knock-on effect and whether such an arrangement is possible and worthwhile. There is no government advice to reduce or postpone rent, with measures in place to help tenants afford their outgoings, but each case of tenant hardship will need to be considered carefully case-by-case to work out the best arrangement to protect the landlord and tenant both now and in the future, with the tenancy likely ongoing. One real safety net at the moment for tenants is the restriction on evictions, but this also increases the risk for landlords of tenants not paying at all.
A big obstacle which has been presented by the lockdown is carrying out viewings for properties. With our office closed and all others like ours closed too and being unable to attend occupied properties unless there’s a real need, viewings become practically impossible. There is still interest in the properties that are available and we are seeing new lets still ticking along, but at a slower pace than before. However, the need to embrace technology is more apparent here than ever before. By being able to present 3D tours or video walkthroughs, potential applicants are still able to view properties, as close to the real thing as possible!
This feeling isn’t only present in the residential property sector and is being felt similarly in commercial property. Instructions are still being received from both parties looking to dispose of & also from those looking to acquire, however, what we are finding is that in most cases, the pause button is being pressed until we have some certainty of when life will get back to normal.
On the disposal side, some instructions are part of the natural process who would have been looking to dispose of their property, whether COVID-19 had hit or not. We have however seen some properties come to us where the pandemic has had a direct impact on their business. This has been felt by some sooner than others where they had links with China & have felt the impact earlier than the rest of the UK.
In regards to acquisitions, we are finding that occupiers are still looking for sites & see this time as an opportunity to organise & prepare for when we come out the other side & there will be a hopefully anticipated boost. Whilst many are feeling the pain right now where there are losers there are winners & have seen certain sectors benefit in these times. The demand for IT & Tech will have only increased with a nation moving there office & social life to their dining room table, whilst it has been apparent that food stores will have also seen a surge. At the same time, an immediate requirement for staff in some sectors will have seen an opportunity for some recruitment companies. In addition to this, new home builders are still keen for new sites & we have recently received a requirement from a client for large scale residential development sites for 200 units or more.
With The Bank of England having dropped interest rates to an all-time low we are hopeful that lenders will adhere to their responsible & moral obligation & pass the benefit of these rate drops to the business world accordingly, to keep things moving.
The real feeling in the property industry as a whole is that the coronavirus lockdown has pushed the market into pause. Home moves have been curtailed, with the advice being only to move if absolutely necessary. Viewings are down and more difficult than ever before and being propped up by technology; there are holidays for mortgages and arrangements being made with rents; and valuations for mortgages have been completely cancelled by lenders. The feeling is that there will be a big bounce-back once the problem has passed, but the overall risk to the industry hangs on how long this pause lasts and how much damage has been done over that time. The question overall is what will the effect be and how long will it take for the market to fully recover?