When sanity returns and the lockdown eases, I believe that some potential property buyers will try and compare the precipitous falls of the stock markets to the values of the residential property market, by asking for a 10% to 15% discount.
To respond, I have to say that they are two separate entities. The stock market has recently scaled unprecedented heights (albeit with a recent correction of approx. 17%), whilst the housing market has been languishing for the past six years and is down in certain sectors, by up to 40%.
As to my predictions in respect of the effect of the virus on values, it is totally dependent on whether there is a stock overhang in any sector, where numbers of properties for sale are far greater than the cash buyers to purchase them.
This is probably relevant to the market in excess of £10million and I would have thought that a discount of possibly 10% could be appropriate.
In the sector between £1million to £3million, where there is an even balance of buyers and sellers, I don’t believe values will change and this is borne out by two sales that we have agreed today, in the midst of the problems, which were agreed earlier on in the year and went into temporary suspension due to the present financial problems.
It is my view, now that the trend of fatalities from Covid-19 is moving in the right direction and as we move towards an easing of the lockout, sentiments will improve and with it, confidence will return.
We shouldn’t forget that mortgage rates are at an all-time low and this will underpin any concerns about the gyrations of the indebtedness of the UK.
Let us hope and pray that the valuers for mortgagees and other lending institutions are not too conservative with their estimates of value, which could be fueled more by their desire to protect their professional indemnity policies than to reflect real values in the market place.
Trevor Abrahmsohn is Managing Director of London agency Glentree Estates.