Everyone is having to make adjustments to their home and work life during the lockdown and those who were in the throes of moving home or having work done have been presented with additional challenges.
Questions are being asked about how to complete a sale, whether you should put your transaction on hold, and what arrangements should be put in place where tradesmen are allowed to continue working.
Home buyers and sellers also want to know about the direction of prices and how the lockdown will affect the supply of properties.
From mid to end March there has been a marked decrease in both property sales volume and the number of homes coming to market. This is unsurprising, considering the stay at home guidance meaning people are unable to attend in person property viewings and in person valuations.
Agents have adapted to offer virtual property viewings and virtual valuations, enabling people to get started on their property buying and selling journeys.
The closure of the Application Record by Registers of Scotland (ROS) on 24 March also affected the completion of property transactions. Whilst the Law Society of Scotland and ROS worked to establish interim measures to allow certain transactions to complete, the Scottish Government released guidance on 31 March that property moves should be delayed until after the social distancing measures have been lifted.
This has obviously impacted the volume of completed property sales during this time. The significant drop in sales volume is a result of social distancing measures and guidance from the Scottish Government, rather than lack of demand.
Properties coming to market
While agents are now offering virtual valuations, properties in Scotland also need a Home Report before being marketed which requires a surveyor to attend the property in person. At present, the approach of surveyors is to delay these until after the current social distancing measures have been lifted.
The properties that came to market in recent weeks had their Home Reports and photographs prepared before the current social distancing measures. It is likely that many of these sellers had already planned to put their home on the market in the spring, and decided to go ahead.
ESPC agents have suggested that some sellers are happy to place properties on the market due to the opportunity to be seen in a quieter-than-usual marketplace.
It has also been noted that some of the properties coming to market in recent weeks have been smaller one or two bedroom flats. Many of these appear to have characteristics that would be associated with holiday lets, being in popular areas for tourists.
Short term let landlords are choosing to step away from this market due to the travel restrictions currently in place. Some are choosing to sell their property, while some may be moving to the long-term letting market.
Nicky Lloyd, Head of ESPC Lettings, said: “We have received a number of enquiries from current landlords looking to advertise properties that have previously been advertised through Airbnb and other similar platforms.”
Interest rates and the mortgage market
Interest rates were slashed from 0.75% to 0.25% on 11 March and on 19 March the base rate was reduced to 0.1%.
Rate eductions would normally be reflected in the products offered by mortgage lenders. Due to the economic effects of COVID-19, however, many lenders have chosen to temporarily remove or restrict their range of products available.
Many lenders are now seeking a larger deposit of between 15–40%. However, there are some mainstream lenders still offering mortgages and re-mortgages to clients with a smaller deposit. As the market is continuing to change and adapt, any interested buyers or re-mortgagers should speak to their mortgage adviser.
Within the range of financial assistance offered by the UK Government due to COVID-19 is the option for mortgage borrowers to take a three-month payment holiday. Although the term ‘holiday’ has been applied, it is in fact a pause from making normal mortgage payments for a period of up to three months.
Interest will still be applied on the outstanding debt and the debt will still need to be repaid, so you end up paying more in the long term. Under the current situation, a mortgage holiday should not affect individual credit scores. Anyone requiring such assistance should contact their lender directly.
Prices and demand
According to the Halifax House Price Index for March, prices rose by 3% year on year, though there is bound to be some lag caused by the lockdown.
ESPC’s March 2020 House Price Report, covering the first quarter of 2020, showed that while there had been decreases in sales volume and homes coming to market, both average selling prices and the average percentage of Home Report valuation achieved remained relatively steady.
Some ESPC agents have continued to report receiving offers on properties, often over the Home Report valuation.
“At present we expect that, whilst transaction volumes will decrease significantly during this period of social distancing, property selling prices will stay relatively stable.”
Jamie Johnson, CEO of FJP Investment, says: “Despite much speculation about how the current climate would impact the property market, it is interesting to see that house prices have in fact risen once again – although this is likely a reflection of the momentum initially triggered by Boris Johnson’s 2019 General Election victory, which sparked a flurry of activity at the start of the year.
“While buyer activity has naturally slowed down… this is not due to diminishing demand for real estate but rather people pausing on major decisions or struggling to get deals over the line.
“Based on the rate of house price growth in the opening months of 2020, there is clear appetite for property investment – many expect that lockdown measures will only result in pent-up demand that will be released once the pandemic is contained.
“For now, we will have to wait and see what next month’s house price index reveals about the immediate impact COVID-19 is having on house prices.”
Paresh Raja, CEO of Market Financial Solutions, added: “Today’s House Price Index comes at an interesting time. March was, after all, an extremely eventful month – we had the 2020 Spring Budget, interest rate cuts and government-backed relief to support businesses, borrowers and consumers. These various announcements have no doubt played on the minds of UK homebuyers, and this would have contributed to the house price growth recorded by Halifax.
“The question now is whether the rate of house price growth will drop significantly in April. Current forecasts suggest this is likely to be the case, though this is to be expected given how lockdown measures have prevented valuations from being completed and lenders taking on new loan applications.
“I am optimistic that any decline will be momentary and should not overshadow the long-terms projections for positive house price growth over the coming years.”
What work can tradespeople do?
In England tradespeople can continue to carry out work in homes if the residents are not self-isolating. This means that all residents of the household must be displaying no symptoms of the virus before a tradesperson can enter. Additionally, the worker should continue to remain at least 2 meters apart from the residents of the household.
In Scotland all building sites have been advised to close with only essential and emergency work being asked to continue. However, tradespeople who provide community services such as gardeners and window cleaners who work alone are able to continue their work. All tradespeople must also adhere to the two-metre distancing from all clients and colleagues.
The latest Scottish Government guidance identifies non-essential construction work in 12 sectors that “should be halted at this stage”. These include domestic housing, offices, commercial property, leisure and retail.
Essential construction work relates to the immediate response to COVID-19 such as the field-hospital being constructed at the SEC, or other works that are concerned with the provision of “testing, containment, treatment, research, vaccine production, protective equipment manufacture, other key medical supplies, and other related activity, including supply chains” as part of the response to COVID-19.
Many housebuilders and contractors had already announced closure of their sites and the rest will undoubtedly now swiftly follow. The guidance states that operations should be shut down safely, made wind and water tight where possible, and suitably secured. An exception to immediate shut down is made for those sites which can be safely completed within five working days.
There may well remain a debate between contractors and employers as to who carries the time and cost risks of temporary site closures instigated on the back of the new guidance. That is likely to be fuelled by the fact that the Scottish Government has produced ‘guidance’ only as opposed to primary or secondary legislation that obliges all non-essential works on building sites to stop.
What if I have work planned?
Clients can use video calls to enquire about work that needs to be done virtually. Tradespeople have said they are happy to provide an accurate quote using photos and video calls, so provide as much detail as possible.
I am a tradesperson who needs to continue working, how do I keep myself and my client’s safe?
Tradesmen should bring four essential items to the job: tissues, a black sack to collect any potentially contaminated objects, hand sanitiser and a water bottle or thermos.
Do not accept tea, coffee or water from the client’s mug or glass. Wash your hands regularly with hot soapy water and if you have access to it, wear protective clothing designed to inhibit the spread of viruses.
To protect your clients, make sure you ask them what you can do whilst working to keep them safe. If they have pre-existing health conditions, they may ask you to limit your time in the house or to drastically change your activity when taking on a job.
Try to limit the number of deliveries by buying in bulk and from one supplier or arrange for deliveries to take place at your home. Make sure to disinfect door handles and other objects you have touched once the job to ensure any germs are not left over. Practice social distancing and ensure that you stay at home if you have any symptoms that may be Coronavirus.
I’m worried about my business, is there any help I can receive?
Tradespeople will be concerned about the impact of a lockdown on their business. Whilst it is still feasible for businesses to continue running, the government has outlined several measures to keep business going during this difficult period. Tradespeople will have access to:
- Cash grants
- Business interruption loans
- Sick pay refunds
- Time to pay service
- Job retention scheme
- Self-employment income support