The latest (April 2020) results from the RICS UK Residential Market Survey confirmed that the UK housing market has effectively been closed for business, with 80% of survey’s contributors seeing both buyers and sellers pulling out of transactions, resulting in the newly agreed sales balance for April falling to -92%, down from -68% in March.
In April, the survey sought views on the potential support measure of a stamp duty holiday from Government as sales restart. The majority of respondents (62%) believed that a stamp duty holiday would help the market recover post-pandemic, by lifting sales and leaving prices relatively unchanged. On average, respondents anticipated that sales would rebound to their previous levels in around nine months.
In April, unsurprisingly, a net balance of -93% of respondents reported a decline in new buyer enquiries over the course of the month, dipping further from a net balance of -76% in March. New instructions also continued to fall, with -96% of contributors reporting a drop rather than rise in new properties being listed for sale. This is the weakest net balance reading since the inception of this series in April 1999.
As far as prices are concerned, following a run of three successive months of positive readings, the RICS headline house price balance fell into negative territory with a net balance of -21% of respondents noting a decline in prices. 35% of the survey participants believe that when the market reopens, prices could be left up to 4% lower, while more than 40% take the view that prices could in fact fall by more than 4%. Feedback suggests that a recovery in prices could take longer than sales levels, with respondents suggesting, on average, prices will recover in 11 months.
In the lettings market, rents are expected to fall across the UK in the coming three months, but stabilise at the 12-month horizon. At the five-year horizon, rental growth projections stand at around 2.5% per annum, in comparison with prices rising by around 2%.
Simon Rubinsohn, RICS chief economist, commented: “Not surprisingly, the latest survey shows that housing activity indicators collapsed in April reflecting the impact of the lockdown. Looking further out, there is a little more optimism but the numbers still suggest that it will be a struggle to get confidence back to where it was as recently as February. Moreover, whether this can be realised will largely depend on how the pandemic pans out and what this means for the macroeconomic environment.
“Critically, to ensure the housing market can begin to operate in a more functional way and that developers have the confidence to continue building, further specific interventions from Government, following on from the announcement of flexible site working hours and support for smaller developers, are likely to be necessary.”
Hew Edgar, head of UK government relations at RICS, added: “RICS last month called on the UK Government to explore confidence-boosting measures for the residential market as it reopens and the data suggests that our proposal for a stamp duty holiday would be a successful change that would boost transactional activity, helping people move home.
“There are, of course, other options available to Government as they reopen the market, such as reducing or removing stamp duty for downsizers that would kick-start market fluidity.”
David Cox, chief executive at ARLA Propertymark and Mark Hayward, chief executive at NAEA Propertymark said in a combined statement regarding the reopening of estate agencies: “It’s great news for consumers and the industry that the housing market is being opened up and people can let, rent, buy and sell properties again. The new regulations provide clarity to agents and will allow them to deal with pent up demand from consumers. It’s also a step to reinvigorating the housing market and will be a boost to the economy. Safety of course will be paramount, and we would encourage everyone to ensure that they follow Government guidelines closely to protect others and themselves.”
However, the impact of COVID-19 has been less severe on land agents, according to Richard Watkins, director at Aston Mead, who says that it has been “business as usual” during the lockdown. Watkins added: “We certainly haven’t stopped working during lockdown. Deals are still being agreed and exchanged and clients are still calling us for development opportunities. We’re hearing from developers who still want to buy sites and see no reason not to proceed. So far, it has been as close to business as usual as we could have hoped for.”
Watkins says that whilst some developers have been a little wary about buying sites with planning permission in place because they are less certain about the immediate future, those buying sites on which they are hoping to get planning are still going ahead and are hungry for more.
He added: “For many investors, this situation will present itself as a very good buying opportunity. Some people will dither; some will sit on the side-lines. But we’re very good at adapting in this country.”