Are you buying or selling your property during the coronavirus pandemic? Let us know your experience
The country is on lockdown, buyers can’t go to house viewings, sellers are pulling their homes off the market, and research firm Capital Economics has forecast national GDP will contract by 15 per cent between April and June.
The outlook for the property market is “the most uncertain it has ever been,” says Hansen Lu of Capital Economics.
But people still need places to live, and few can simply abandon their purchases. So what does it all mean if you’re currently halfway through making a home purchase?
What does the government say about moving house right now?
The government has said to delay sales “as far as possible”, although there is no need to pull out of transactions altogether.
If you haven’t yet exchanged contracts, put the deal on hold – unless the property your are moving to is already vacant, in which case you can continue with the transaction (although bear in mind removals workers may not be able to work).
If you have exchanged and so are legally obliged to complete the purchase, you must follow social distancing guidelines during the transaction. Speak to the conveyancer and all parties involved in the sale, including the buyer or seller, in order to agree on a later date after stay-at-home measures are lifted to complete the purchase.
Mortgage lenders are also working to extend offers for up to three months for buyers who have exchanged.
The government also advises changing move dates if anyone in the chain is having to self-isolate because they are vulnerable or have symptoms.
The police guidance on enforcing stay-at-home measures has an exemption for ‘critical home moves’, if a new date is unable to be agreed.
Will I still be able to get a mortgage?
Be wary that the mortgage offering has changed drastically. Overwhelmed with demands for payment holidays, banks have pulled more than 1,500 mortgages from the market.
Some lenders, such as Vida Homeloans and Atom Bank, have withdrawn from the market entirely. Others, such as Halifax and Family Building Society will no longer lend to buyers who do not have at least a 40 per cent deposit. The changes will hit first-time buyers, who had previously been able to get mortgages with a 5 or 10 per cent deposit, particularly hard.
Virgin Money and Skipton Building Society have suspended all new house purchase mortgage applications. It is understood other lenders are pushing for transactions to be suspended by the Government.
“We have had clients mid-way through a mortgage application only to find the process is halted and the product withdrawn before they can reach completion and the release of funds,” says Angus Stewart, of Property Master, an online buy-to-let mortgage broker.
Are house prices about to plunge, and should I renegotiate?
Zoopla has forecast drops in transaction volumes of as much as 80 per cent in individual spring months and an average fall in agreed sales of 60 per cent between April and June. Savills has forecast a short-term price drop of 5 to 10 per cent. But analysts are not anticipating a crash.
If buyers can’t go to house viewings, fewer even heavily discounted sales will take place. And most sellers simply won’t accept big cuts, says Lu; they will just sit tight.
The number of forced sales, which typically drives down prices in times of crisis will also be reduced and delayed by the government’s measures to introduce mortgage holidays and the Bank of England’s decision to cut the base rate to 0.1 per cent.
Experts are anticipating a ‘V-shape’ dip, with a relatively swift recovery. Lu expects an overall 3 per cent fall in house prices across 2020 and a return to growth in 2021. Though he does not anticipate a surge. Market confidence will take a while to recover.
For now, if buyers are under offer, “they should definitely renegotiate,” says Jess Simpson, a buying agent in the prime country market. She recommends trying for a 10 to 20 per cent reduction.
There are caveats: the recent government measures mean more sellers can wait things out, says Robin Chatwin of Savills. “We had someone who tried to negotiate, and the seller just said no.”
In the prime London market, there are a few cases where “we have been in a stand off for a few months, and I am now starting to get calls from the sellers,” says Roarie Scarisbrick, a buying agent at Property Vision. “But the majority of sellers are discretionary. They just won’t sell.”
If this sale falls through will I be able to find another house?
The government has effectively frozen all transactions that haven’t exchanged contracts, so you won’t be able to move to anywhere new quickly.
But if you have time to shop around, “it’s a fantastic opportunity for a good deal,” says James Hyman of Cluttons. “Anyone with a property still on the market is going to be a motivated seller, and you’re going to have no immediate competition.”
But hard-nosed negotiators will also be taking a risk. “There’s nothing coming to market, and homes that were just launched are being taken off,” says Simpson. Under the lockdown, house viewings are almost impossible.
The number of homes being sold off-market will rise, says Chatwin. “The people who have taken their properties off market are in their seventies and they are self-isolating,” he says. There are still people who want to sell their homes, they just can’t go through the process right now.
How much are the logistics changing?
For those going through the legal processes, flexibility is key. Chatwin notes one family who won a sealed bid on a property, but had to go into self-isolation. In this case, “the solicitor has just accepted the compliance we did on the buyer earlier,” he says.
Andrew Boast of SAM Conveyancing advises using a solicitor that employs online ID checks using scanned documents. Using larger law firms, which have more resources and a bigger workforce, will mean increased protection against a slowdown in your purchase if your solicitor falls ill, he adds.
Note that almost all surveying is now on hold. Though it is still possible. Surveys can be arranged if a property is vacant, or the owners are out, says Boast.
The British Association of Removers has also issued guidance to its members to postpone all moves, excepting those already underway, during the lockdown period.
Other issues will arise if the current owner or tenant is undergoing self-isolation, or if either the buyer or seller becomes seriously ill. In conveyancing, there is no clause for unforeseeable circumstances in standard sale contracts, says Boast. Additional clauses to allow contracts to be rescinded without financial implication due to a coronavirus-related issue must be approved by both buyer and seller, he says.
“The most important thing is to talk to the other side, everyone has got to work together,” says Chatwin.
Which markets will be the most resilient?
“I think the country market is likely to be the main winner,” says Scarisbrick. “This episode is going to teach everyone how to work from home, and it’s going to make families with children feel that they would rather be in the country.” Before the lockdown, “everyone was running for the hills.”