As of the 13th May, the government has relaxed restrictions imposed on the property sector during the coronavirus lockdown period. Estate agents, removal companies, conveyancers, and surveyors can resume trading; buyers and surveyors can visit properties subject to social distancing constraints. Zoopla estimates that 373,000 property transactions valued at £82 billion stalled during the coronavirus lockdown.
The question arises, “How many of these will be able to resume and complete?”. How many of these buyers have been furloughed or made redundant? How many of them will be caught by banks re-assessing the loan offer they have made – in some cases after the exchange of contracts has already taken place which would leave buyers unable to complete.
All lenders will be keen to ascertain if there are customers who have had a change in their circumstances such that they may wish to re-assess the loan offer. In some cases, the loan offer will have expired and it remains to be seen if customers will receive a new offer.
Lenders can withdraw their mortgage offer if they believe the value of the property has dropped significantly and the deal no longer represents good value or the property no longer provides adequate security.
If surveyors are asked by lenders to revalue a property what will be the outcome? There have been very few transactions completed in the lockdown period and therefore few comparables available to them.
Will surveyors be able to look back to pre-COVID values and form the view that they can disregard the lockdown period and value properties accordingly?
Aroon Rana from Anderson Wilde & Harris Surveyors says,
“Pre Covid, we were experiencing the effects of ‘ the Boris Bounce’ and benefited from a buzzing and positive market. Indeed some of this demand may have dissipated now, but the good news is that following the Government’s announcement to re-start the housing market, there is a sense of relief that transactions can continue.
Agents, solicitors, and lenders, we are currently speaking with, report that many of the buyers are keen to resume the process. It is difficult to predict the impact on values going forward, particularly as we have yet to realise the full impact on businesses and the employment market. It is interesting to note, however, that while valuing during the Lockdown period, we found that depending on location, property type and other factors some ongoing sales were reported to be renegotiated, within a 3.5 – 6.5% range.”
Given the relatively short duration of the lockdown period will the market be able to absorb reductions in value in the order of 3 to 6.5% and bounce back? This will largely depend on the number of redundancies amongst those on the property ladder or about to buy their first property. Will deep job losses in some sectors translate into reduced demand for properties?
Within five hours of the relaxation of the lockdown restrictions, Rightmove reported a 45% rise in traffic, 70% more email enquiries for viewings and 2115 new listings. If this is representative, it points to a considerable amount of pent-up demand which could lead to a strong bounce-back if transactions can be completed.
It will be interesting to see how quickly those lenders who have effectively withdrawn from the market re-enter in these circumstances? Will fears of a second Corona spike incline them to a ‘wait and see’ approach before they bring back furloughed staff and re-open for business?
For lawyers this does not mean an immediate return to normality. It is possible that transactions will be harder to progress and will take more time than they did pre lockdown. Conveyancers should be instructed as early as possible i.e. from the time that properties are marketed. KYC requirements, Client Care Letters and SPIFF forms can all be dealt with during this period.
Many firms of brokers, surveyors and conveyancers have seen their businesses decimated over the last two months. Unless they were in rude health before the lockdown the evidence seems to suggest they will not be able to obtain a CBILS loan as the banks are likely to deem them not viable for a loan. Many of the participants in this market endured a difficult period over the last two years and were looking forward to a far more positive trading year in 2020 only to be hit by the lockdown at a time when it seemed to everyone that the property market was responding positively to the election result and a greater degree of certainty concerning Brexit.
It remains to be seen if the relaxation has come early enough to save these firms.
Time will tell.