The London property market has been left in something of a stasis state following recent events. Buyers, sellers, and renters alike have been instructed to hold off on moving to prevent the coronavirus from spreading even further. While some transactions are going through right now, the market as a whole depends on people being able to assess and view properties. It’s proven difficult to do that with social distancing and mobility restrictions.
Considering the potential loss of life coronavirus could cause, the drop in housing transactions over the next couple of months is nothing in comparison. Even so, it will have a huge effect on the entire sector. Mortgage lenders must offer customers the ability to hold off on making payments for three months while construction companies are closing up shop entirely. Things will prove especially difficult for agents already facing financial problems before the coronavirus pandemic.
The government are looking for ways to reduce the damage. One measure they have introduced is putting a hold on property taxes. Another is paying employee wages on behalf of businesses. Even so, it will be difficult for small agencies and those that were already having trouble before the pandemic started. The situation may end up similar to the downturn of 2008-2009 that saw thousands of agents leave the industry.
Things may still be difficult for digital platforms such as Zoopla. While their employees have an easier time working remotely from home, they will still find themselves in a tough price war with intense competition.
As the selling season looms over the London property market, the timing couldn’t be worse. The property market has already endured several years of strain over Brexit concerns, changes to stamp duty, and high property prices that locked many out of the market. The market was on the verge of recovery and enjoying the “Boris Boom” before everything went wrong.
Rents and advertising are the two main areas where changes are being seen, particularly with online real estate portals. Rightmove, the leaders in the industry, currently charge an average of around £1,000 per month per advertiser. The outbreak has led to a huge pushback against those fees. Rightmove originally planned on deferring the fees for up to six months; a plan that wasn’t taken well. They have since changed to offering a 75% discount on fees for up to four months which is going to cost around a fifth of their revenue.
There are some silver linings to be found though. The drop in travel bookings mean that landlords who offered their homes to tourists in the short-term have started to offer them for less on the long-term. This could be a good time for people who need more room or want to get a change of scenery.
How well the market is able to recover again when the danger passes depends on how well the government and the market can come together and prevent permanent damage. Given that many people are finding themselves unemployed and with less money though, there won’t be much demand for new homes and estate agents are going to have a tough time ahead.