How Covid will change the housing market

Ned Browne

Whether you're selling, buying or developing a property, here's what you need to know for after coronavirus

Firstly, there are definite signs of life in the property market. Estate agent Savills reported a 54 per cent jump in agreed sales during the first week of June. That was up 6 per cent from June 2019. However, property prices seem to be slightly down: Nationwide’s house price index for May showed that prices fell 1.7 per cent compared to the previous month. But, of course, you shouldn’t read too much into one month’s Covid-ravaged figures. 

Secondly, construction has bounced back. Almost all building firms are now fully operational, albeit with social distancing measures in place, which are likely to reduce productivity and increase costs. So, those with deposits on new builds we can now see the light at the end of the tunnel. 

 

Changing market 

Property development and property prices are inextricably linked to the local jobs market and amenities.  But the link may be becoming weaker.  Consider the following: since the lockdown, according to the Office for National Statistics (ONS), online food sales doubled in March (+101 per cent compared to March 2019).  As a percentage of overall spending, online now accounts for 30.7 per cent.  In March last year, it was 22.4 per cent.  That’s a 37 per cent increase in just one year. 

So, what does this mean for property prices?  While it’s hard to know the exact impact, for some people, the shift to online shopping will mean being close to shops becomes less of a consideration. This could preempt a move from the cities. Moreover, many workers have discovered that working from home is completely viable.  Given the huge commercial rents many companies pay, it’s likely that many companies will reduce their office space and offer employees more flexible contracts. This means that workers may now be willing to commute further, in the knowledge that commuting will actually be an infrequent event. 

Indeed, property buyer priorities seem to have changed. Recent research has shown that gardens, broadband and office space are now bigger draws than before.  There’s been a spike in demand for garden offices too.  Currently, 12 per cent of households in Great Britain have no access to a private or shared garden (rising to 22 per cent in London).  This may give developers pause for thought: they will move with the market. 

 

What does the future hold?   

Job uncertainty as the furlough scheme winds down is likely to make both buyers and sellers more cautious.  So, property transactions are likely to fall.  But, interest rates are still at historic lows (the base rate is just 0.1 per cent), meaning borrowing money has never been cheaper.  And property has always proved a good long-term investment. 

But the type, location and size of properties bought and sold may change.  It’s likely property use will change too.  Office blocks could be converted into apartments and high streets could become residential streets.   

These changes were already happening, albeit slowly; Covid-19 may have turbocharged them. 

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