What effect will coronavirus have on the property market?

Read what Mark Pollack and other industry experts have to say.

What effect will coronavirus have on the property market?

With the economy teetering on the brink of a coronavirus-induced crash, property bargain hunters are beginning to circle here and abroad.

This week the Bank of England cut the base interest rate — the rate at which it lends money to high street banks — from 0.75 per cent to 0.25 per cent, which should reduce mortgage payments for those on tracker and variable discount deals. Several high street banks said they would allow those affected by the virus to defer mortgage and loan payments, increase credit limits and gain access to fixed-term savings.

Wednesday’s budget included a range of measures aimed at helping those on benefits and working for small businesses to withstand the coronavirus outbreak.

The virus may have also been a factor in the chancellor delaying the introduction of an additional 2 per cent stamp duty for non-resident property buyers until April next year. There had been concerns that the pandemic might dampen the so-called Boris Bounce that has helped to revive the property market since the Conservatives’ decisive election win.

Capital Economics, a research consultancy, has lowered its prediction for house price growth in the UK from 3 per cent to 2 per cent.

 

Hansen Lu, an analyst for Capital Economics, says: “Buyers and sellers may delay home viewings until the virus recedes. Furthermore, an increase in quarantine measures could force agents, solicitors and surveyors to work from home or not at all.”

Rachel Thompson at Sterling Private Office, a buying agency, says that clients are shying away from viewings for purchases and rentals. Sterling, however, has being giving some buyers video tours on their smartphones.

Housebuilders had lamented the cancellation of many of the big property trade shows in China at the beginning of the year, fearing that it would hit their off-plan sales, which are vital to fund developments.

However, Juwai IQI, a real estate network in Asia, says that Chinese and Asian buyers remain active online and it expects a surge of sales as soon as travel restrictions have been lifted. It reported a 6.8 per cent increase in Chinese buyer demand for British properties in February.

“The coronavirus has created a situation in which the number of buyers researching, inquiring about and doing virtual tours of real estate is climbing, but the number attending open houses and settling purchases is falling,” it said.

Clynton Nel, the residential director at Johns & Co, an estate agency in Canary Wharf in London, says: “While the UK continues to brace itself for the peak of the outbreak, containment measures in China do seem to be having an effect, to the extent that we are starting to see a resurgence in interest from this market.”

Chinese buyers are contacting Nel via WeChat, a messaging and social media app, to seal property deals in London.

James D Marshall, the founder and chief executive of Spec, a company that creates 3D digital models of properties and offers would-be buyers virtual tours, says: “Since the government’s coronavirus guidance on January 24 we have witnessed a 300 per cent increase in virtual tour viewings from the US and a 1,500 per cent increase from China, including Hong Kong.

“The market is quieter because of the coronavirus emergency, but we had a record number of tours on Monday. People are also spending twice as much time on our virtual tours.”

Jose Luis Leiros, the director of innovation for the Spanish developer Aedas Homes, is using a TV studio and technology developed for the game Fortnite to give prospective buyers virtual tours accompanied by a real-life agent. It is so effective that Leiros recently sold a €415,000 (£362,000) apartment to a Russian couple who never left their sofa.

There is also a chance for bargain hunters in the wake of the virus outbreak in Italy, the most affected country in Europe.

Gemma Bruce from Casa & Country Italian Property says: “We sense that greater levels of negotiation will be possible this spring and summer, given that vendors are likely to lose many bookings and therefore be motivated (and under pressure) to sell. Usually we advise up to 10 per cent off asking price is possible to negotiate. Perhaps this spring this will be a higher percentage.”

Mark Pollack from the Aston Chase estate agency says: “A number of mainland, Hong Kong and UK clients who are stuck in self-quarantine and sitting around at home, unable to go out sometimes for between 14 or more days, have been on the internet and on the phone calling up about properties, for both their use and investment. They have had much more time on their hands.

“Also, buyers want to cut deals before the stamp duty surcharge comes into force in April 2021.”

Residential auction houses are scheduled to hold their next ballroom auctions between the end of March and the beginning of April, which, according to England’s deputy chief medical officer, would coincide with the peak of the epidemic.

Chris Coleman Smith, the head of auctions at Savills, said: “We’re monitoring the situation week by week. We will be taking what we believe is the most sensible approach for our next auction, on March 26. As is the case with all our sales, buyers will be able to bid remotely either by telephone, proxy or via the internet for properties listed in the catalogue.”

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