May should be one of the property market’s busiest months, as families move in time for the new school year, and homes look their best, with flowers blooming and light streaming in.
Since all activity was restarted last week, estate agents have reported a huge spike in demand, with buyers and vendors desperate to get their deals moving again.
But while the housing market may have been restarted, in reality it’s open in name only.
A huge number of potential buyers have been cut out of the buying and selling as a result of the economic fallout of the pandemic. Currently, 8 million British workers are furloughed. On top of that are the 3.5 million people who are eligible for self-employed payments, according to HMRC, and the 2.5 million who have claimed Universal Credit since the crisis began.
Crudely, that’s 13.8 million people hit financially by coronavirus – around a quarter of the 52 million people aged over 18 in the UK, according to the Office for National Statistics. And this doesn’t include hundreds of thousands who have fallen through the cracks of the Government’s financial package, such as directors of companies or freelancers who didn’t file a tax return last year.
My back-of-the-envelope sums also do not take into account those 2.5 million people who are vulnerable or shielding from the virus, who may be suffering financially, as well as physically unable to move home.
With a quarter of the adult population essentially ineligible to get finance, how can the property market really restart?
Capital Economics, a research firm, suggests that at least a quarter of sales currently in progress will be cancelled. This is partly because a good chunk of the paused transactions will be among people furloughed. Few mortgage offers to those who have been furloughed have been rescinded, but some banks may offer a smaller loan if income has fallen.
Banks – and nervous buyers – are not betting that all jobs that have been furloughed will come back again; accountancy firm KPMG has estimated that one in five workers on furlough is in danger.
Furloughed workers applying for a new mortgage will likely have to wait until they are back on full pay, as many lenders will only use their current salary as a basis, or they must have a big deposit, in excess of 40pc. (Barclays, HSBC and Halifax will allow furloughed customers to take out a loan based on their normal salary, as long as their employer is topping up their payments.)
High-paid workers who have been furloughed will face an even tougher time as they will have taken a bigger hit to their income.
Some buyers are succeeding with low ball offers, but many more people will also be biding their time, unwilling to transact if they don’t have to move, reluctant to put an offer in for a property that could tumble in value.
This is particularly the case for first-time buyers who are wary of schemes such as Help to Buy; the National Audit Office calculated that new-build homes come with a 15 to 20pc price premium, leaving them at risk of negative equity if house prices fall significantly.
At a time when we could be facing the worst economic crisis for 300 years, those who want to move to the countryside, or who are sick of being shut in the city with no garden, may well weigh up their economic security over the need for more space.
There’s also the more practical problem of the mechanics of buying, which will have a hard time starting back up again. Surveyors and valuers have been left with a huge backlog during lockdown and so those wanting to move quickly will have to wait months to get on with the transaction.
Buyers also face long delays for council searches and Land Registry checks, as many of those workers have been furloughed themselves.
And don’t forget that the housing market is still shuttered in Wales, Scotland and Northern Ireland, which together represent 16pc of total transactions in the UK.
The beleaguered property market may be up and running in theory – but reality is another thing altogether.