Should I accept a renegotiated offer?
“The short term is going to be pretty brutal,” says Neal Hudson of Resi Analysts. Capital Economics has forecast a 4 per cent fall in house prices this year, although other property experts have suggested the declines could be much higher
“Expectation of worth is a big factor,” says Hudson. “If seller expectations remain high, they will have stock on the market unsold for a while.”
But then in the current lockdown, they might well do either way. And purchasers do not have more leverage than sellers, says Hudson. “Buyers will find it difficult to find someone else who will actually sell and move.”
“A lot will depend on everyone’s personal circumstances,” says Lucian Cook, head of residential research at Savills. Once the lockdown is over, the property market will be grappling with a recession.
But there are three key factors that suggest the situation will be less severe than after the 2008 house price crash, says Cook.
Interest rates have long been low and house prices had been falling gradually in relation to inflation for some time. Previous crashes came after a period of fast house price growth, says Cook; in this case the market has been much less volatile. The government has also been swift to introduce measures to protect jobs, earnings and home ownership. There will be fewer forced sales to bring down prices.
How much have the legal logistics changed?
When it comes to property contracts it is “pretty unusual to have a provision for if the UK goes on lockdown,” says Emma Humphreys, partner at Charles Russell Speechlys. And even more vague terms are rare, says Humphreys. A “Force Majeure” (or “act of God”) clause is not a provision in a standard condition of sale.
Those with sales now completely in limbo might have a case to argue “frustration”, says Humphreys. This is an argument when a supervening event significantly alters the circumstances of the contract. But there is limited precedent in property contracts, says Humphreys.
For those planning to proceed with sales after the lockdown, buyers and sellers should exchange before the move date (to ensure the sale is protected), rather than exchanging and completing on the same day.
It would also be prudent to include a provision in the contract agreeing that the completion date could change due to coronavirus, says Humphreys.
For now, the logistics of getting contracts physically signed are a minefield. “It comes down to passing documents through windows to get them witnessed,” says Humphreys.
Many solicitors have the capacity to process contracts using e-signatures and virtual witnessing, says Humphreys, but the issue is that Land Registry can still ask for “wet ink” documents. For now, these processes are therefore not an option, but there is an expectation that alternative arrangements could be approved soon.