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Market Bulletin

One of the top questions on the mind of property sellers and buyers at present is "what will happen to house prices as a result of COVID-19 and the lockdown?"

The short answer is that it is too early to tell. The housing market has effectively gone into suspended animation and there is little if any real world information from actual transactions available. While some pundits have suggested house prices will fall five or 10 per cent in 2020, it simply isn't possible to know what the economic impact will be.

Housing market activity levels hit more than prices

The impact of COVID-19 is hitting housing market activity more so than prices. Published data shows buyer demand, or demand from sales 'applicants', has dropped since March 7 2020, the date when concerns over the virus really started to impact
consumer activity.

The impact on sales agreed and new listings coming to the market was slightly delayed. This really started to kick in as the government shutdown started to bite from March 24, and estate agents closed their offices and started working from home.

We have not gone to 'zero sales', some transactions are still happening, but in the coming months we are likely to see levels of completed sales transactions down 75 to 80 per cent compared to the levels recorded last year. Nationally, we expect housing sales to be around half the levels last year at around 600,000. This will hit all agents' revenue not just in the current period but well in to the autumn.

As you might imagine we are very keen to try and keep existing sales agreed together so that home movers can get back on track as soon as the lock down is eased. It may well be that the government, who recognise the importance of a functioning property market, may ease restrictions in this sector earlier than a general relaxation. If nothing else they will be looking for much needed revenue from stamp duty and stimulating the
economy in all sectors relating to property moves.

At the moment only sales which are legally committed to a moving date can go ahead or sales where a physical move is not taking place, for example where an investor is buying a vacant property.

Price signals comes from completed sales

House prices are a function of agreed sales prices and completed transactions. The value of a property is what a willing buyer and a willing seller agree as the price for a property after a reasonable marketing period.

Under normal market conditions, there is on average a three to six month gap between a home coming to the market for sale, then being marked as sold 'subject to contract'
and finally making it through the valuation and legal process to a completed sale. Fewer sales agreed and housing completions means the amount of information on
which to inform the price of a home has declined rapidly. It is going to be harder for published house price indices to accurately track price changes in the months ahead as
a result of fewer data points and more volatile pricing for agreed sales.

What about 2020?

Record-low mortgage rates, mortgage payment holidays and Government support for business means that we are unlikely to see a big increase in forced sellers (who would
have to accept lower prices) in the near term. As such, we do not expect any big movement in house prices while the lockdown lasts. Beyond that, it depends upon how
long the market remains disrupted and any longer-lasting economic impact. In previous years, when levels of housing activity have fallen, but the economy has
continued to grow, we have seen the rate of house price growth slow, rather than turn negative. Housing sales volumes fell in 5 of the 10 years between 1998 and 2007 but
annual house price growth remained positive.

What is the current outlook for house prices

This latest shock to the market is unprecedented.

Only once the lockdown is lifted will we start to get any sense of the impact on pricing. Most important will be how much buyer demand starts to return to the market, how
quickly sales agreed start to rise and how the pricing of new property listed for sale compares to earlier in the year. These will tell us how the ending of a suspension of
market activity is starting to impact prices.

Our current expectation is that the Government measures support business and that pricing levels will largely pick up from where they left off at the start of March. Buyers
who dropped out of deals or new buyers coming into the market will be cautious and try to negotiate harder on a discount from asking price to achieve a sale. That said there
are relatively few homes available for sale and choice is likely to be limited moving forward which should help to maintain price levels.

Huge housing equity buffer to absorb any price falls

One piece of positive news is that there is a huge amount of so-called 'housing equity' to absorb the impact of any house price falls. While there are £1,100 billion of outstanding
mortgages in the UK, the total value of all UK homes, according to the Hometrack valuation model which powers Zoopla's home valuations, is more than five times higher.
This is a large cushion to absorb any decline in prices. Tougher mortgage regulations mean most people taking new mortgages in recent years
have put in 15 per cent-plus deposits, so the likelihood of negative equity is low even if prices were to post larger than expected falls.

How we continue to work from home

Although our offices in Trowbridge and Melksham are closed and we cannot venture out to do valuations or viewings we are still beavering away at home answering queries
from potential buyers, who mostly have extra time to browse the internet, and our sellers in preparation for a return to normality. Thanks to the wonders of technology our office
phones are being diverted so you can get hold of us by calling the usual numbers and we have access to emails and our computer software systems.

Should I keep my house on the market?

The short answer is yes. Potential buyers have a lot of time on their hands, even if they are still working. That means lots of time to browse the property portals, have lengthy
discussions about lifestyle changes, including house moves and do all those odd jobs and DIY ready to put their own houses up for sale at the end of the lockdown. Every day
we are getting calls and emails from buyers asking questions about homes we are selling and registering to be contacted about viewings as soon as it becomes possible.

Video tours

It is possible to open your doors to potential house buyers remotely by use of video technology. Our software providers and the major property portals have made it easier
for us to upload video content using links to YouTube video channels. Although we can't send anyone out to video your home, if you are good with video photography and are
familiar with You Tube or other similar services please feel free to have a go at your own guided tour, all you will then need to do is send us a link to your clip by email and
we can add it to your listing on the internet. There are some excellent tutorials on line to talk you through the process.

We will be keeping a close eye on the data so will endeavor to keep you posted as the market situation evolves. In the meantime keep safe and don't hesitate to contact us
with any questions.

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