How can the property market most easily recover once lockdown measures have been eased?
There is no denying that the world is forever changed by the global pandemic we are all living through. Pressing pause on the world’s market place does not mean that business wakes up, dusts itself down and resumes like the past few months were just a bad nightmare. Every economy on the planet has shrunk. The UK’s workforce will not be rounded up at the end of the pandemic and put back to work. Jobs will be lost, unemployment is expected to almost triple by the end of June to around 10 per cent and lenders, buyers and sellers are likely to be a lot more cautious.
Knight Frank predict the property market to contract by 38 per cent in 2020 with transactions reducing by 526,000 residential sales when compared with 2019.
The knock on effect to other stakeholders in the property market is also likely to cost the economy over £8 billion this year. Knight Frank estimate that property owners will delay improvement plans and fewer new builds will be built, creating a £7.9 billion economic loss. Furthermore, it is likely that £395 million will be lost in removals as fewer housing transactions and the current property freeze impacts removers.
The government, already borrowing GDP percentages at levels last seen during the second world war, are also set to come out of this year with record debts and significantly lower income streams with stamp duty land tax (SDLT) receipts falling by £4.4 billion and VAT declining by £1.6 billion. Despite the financial hit parliament will take this year, they will need to make a lot of important decisions to ensure the economy can reignite in a post-virus world.
Sentiment suggests, that currently, people are still looking to move. Only around 2 per cent of properties on the market when social distancing measures were introduced have withdrawn from the market and the pipeline of activity is only expanding. With that in mind Knight Frank have suggested the following measures are instantly needed to encourage home moves.
Firstly, given the hit the government are already taking with reductions in stamp duty, it has been argued by many stakeholders, including RICS, that a full stamp duty holiday is needed for all buyers. This is a ‘in for a penny, in for a pound’ mentality. The government are already set to lose around half of their SDLT revenue and therefore what is a few more billion? However, to a final stepper looking to downsize, saving thousands could be the influencer and determining factor in moving. In turn, this tax reprieve could them stimulate other areas of the market into action.
Knight Frank claim that this measure alone will be insufficient in fully reigniting a decimated marketplace. Extending Help to Buy is also viewed as a vital cog. The scheme helped bring the fragile property market from the brink in 2013 and could continue to do so in 2020. It will provide a vital level of support to the housebuilding sector, encourage developers to continue building at somewhere close to 2019 levels and provide vital help to potential buyers that may find acquiring mortgage deals more difficult in a slightly hardened market.
Technological and cultural improvements could be made to the conveyancing sector according to Knight Frank. They claim that ‘removing the reliance on pen and paper’ is vital with a shift towards the use of blockchain and digital working viewed as a necessary step in safeguarding and improving this section of the home buying and selling process.
Finally, the post-virus suggestions maintain that the planning sector should use the ‘new normal’ as a way of improving its processes. Supply-side measures to improve the efficiency in planning departments is deemed as crucial. Knight Frank reference the fact that the Coronavirus Act already allows planning departments to run virtual meetings to ensure approved land and developments are ready to go post-virus.
Builders and developers have been greatly impacted by the property hiatus and may not have the finances to pick up where they left off. Creating flexible payment options for Section 106 or Community Infrastructure Levy obligations could give developers the ability to investment the money they would otherwise lose. Developers also need to be given extensions to start existing and pending planning permissions in a similar way to powers granted between 2009 and 2012.
What immediate action does the government need to take in order to help stimulate a fragile post-virus property market?
One Response
“to a final stepper looking to downsize”
Who will downsize when there is equity release?
More radical rethink needed.