The Covid 19 pandemic and subsequent lockdown has thrust the housing market into a situation unlike anything it has ever experienced before. The practicalities of a lockdown mean that surveyors are unable to carry out physical valuations and the government has actually urged people not to move house in the current environment. So, how is the situation impacting valuations now, and what might we expect in the future?
Like the rest of the country, surveyors are on lockdown. However, this only prevents them from inspecting property. At Arnold & Baldwin, we are still working but just from home and we are able to produce desktop valuations for clients. We have already been advised that physical inspections will not be mandatory for many of our lender clients, and other lenders are looking into changing their policies to take a more flexible approach to desktop valuations.
With the purchase market effectively put on hold, these desktop valuations will help to keep the remortgage market moving. You may have read reports that lenders have withdrawn products and restricted their lending. It’s worth noting that this is not a signed of dwindled lending appetite but instead it’s a response to the practicalities of the situation. Where lenders have withdrawn high LTV products it is often that case that this type of lending would require a physical valuation, which is not possible currently. And where lenders have restricted their lending more substantially, it has often been the case that they have done this so that they can redirect resource into other parts of their business to handle the huge number of requests from customers asking for payment holidays.
So, what will the purchase market look like when it does return? It seems increasingly likely that a return to normality will happen in phased stages and one of the first trends I think we will see is an increased uptake amongst estate agents for 360-degree virtual tours of properties, which will help reduce physical viewings. At Arnold & Baldwin, we have launched virtual property walkthroughs for customers, with scaled floorplans, high-quality photos and location information. They are available for £199 to anyone buying or selling their home and can be undertaken before, during or after any survey. This approach will help to facilitate viewings and activity in the market, even if some movement is still restricted.
According to analysis by Savills, the central scenario for most economic forecasters is a short, sharp economic contraction in Q2 this year, followed by a rebound towards the end of the year and into early 2021. In fact, Savills expects the suspension of transaction activity to create a build-up in demand, which could be contributed to by the experience of so many people spending so much time at home and deciding they should move to a new house.
When it comes to valuations, we would expect property values to fall in the short-term, given the contraction in the economy and the impact on individual’s finances. However, the pace of recovery could well be faster than previous downturns and historically low interest rates will help to stimulate activity amongst those households whose income has remained stable throughout this period.
At this stage, this is just speculation of course, but there are reasons to be optimistic about the future. For now, our focus must be on staying at home and helping the effort to beat Covid 19 as quickly as we can. We may be able to keep some transactions moving, particularly those that are already well-advanced, but we should use this time to ensure that our businesses are in a strong position to deliver activity and help the market recovery when the world returns to a state of more normality.