Experts say prices in the residential property market will undergo a significant house price correction of up to 14% in the Spring.
Is this prescient foresight or doom ‘n’ gloom prognostication? Let’s look at the economics.
One side-effect of all this Covid chaos is the chasm between residential property consumers and the parlous state of the economy.
The UK has suffered a calamitous drop in growth and is trying to wheeze its way up a steep curve.
Like the embarrassing drunk at the party, unemployment has arrived and has doubled in four months.
Rishi’s budget deficit for this year is a large helping of catastrophe, garnished with fiscal disaster. It will take around 30 years to digest and the consumer will have to lie down to recover. But there’s more.
The national debt is currently £78,000 for every person in the UK, so ‘it’s time to grab the smelling salts because we’ve reached the point where national debt is the equivalent to GDP.
But let’s look instead at the few reasons to be optimistic. At least mortgage interest rates are at a 300-year low, and buyers in all house price ranges have been on the starting blocks since the lockdown period eased in June of this year.
With most of the country stuck at home now, the only holiday being taken at the moment is by Stamp Duty which is temporarily withheld [for homes] under £500,000 until 31 March 2021.
It doesn’t take a biblical prophet to realise that this sector of the market will flourish, until it doesn’t.
I should add that our sales of dwellings between £1 million and £3 million are doing quite nicely right now, to the point that demand is exceeding supply.
Overall, buyers who enjoy secure employment who need to move on will do so regardless.
The rise of Stamp Duty rates post-Spring 2021 may curtail certain purchasers, but this will be mitigated by the government’s Help-to-Buy and assisted 95% mortgages.
The mortgage process has been mired in apathy, particularly where loan-to-value ratios are greater than 60%. These are taking an age to process and it is valuers who are the stumbling block.
They are instructed to discount their appraisals by at least 20%, since they’re terrified about claims on their professional indemnity policies.
There is not much buyers can do apart from gnash their teeth and wail, as these factors impede the forward direction of the market.
But other than that, I’m struggling to see the logic behind the prediction of a cataclysmic drop in residential values next year – which I think are hogwash.
Boris’s comfortable majority may endure for the next decade. The combination of a stable political backdrop and soon to be announced freshly-minted Brexit trade agreement, means that the property market should keep going, with nothing that we can anticipate to ‘spook the horses’.
The English Lion has become a mangy, flea-ridden old moggy. We shuffle around in a fug of anxiety, terrified of whichever bogeyman is media flavour of the moment, wetting ourselves about things that haven’t occurred. And guess what? They probably never will.
Trevor Abrahmsohn is the founder of Glentree Estates in London.