Section 1 – Introduction
Our Market Synopsis is produced for colleagues in councils and housing associations, so it is written with this in mind, but also looks at the wider housing market conditions.
We drafted our standard report for March covering the January trading period for most commentators and February for Rightmove and at the time we planned to report “the indicators for new buyer enquires, agreed sales and new instructions increase in the January RICS report. Looking ahead respondents anticipate prices to increase across UK during the next 12 months – strong demand and growing sales are eroding supply at a faster rate than it is being replenished. Hometrack expects the imbalance of supply and demand to remain over the first half of 2020.”
The thrust, as had been the case in our February report, was that the prospects as reported by all of the commentators was positive. Most interesting was the complete lack of reference to Coronavirus!
Section 2 – Our take on the current situation
As we all know the environment in which we are operating shifted on its axis and those bright outlooks cannot now be the case. So, what will happen to the housing market? Demand has not gone away. As many people who needed homes a few weeks ago need them now and when the lock down is released; but will that pent up demand turn in to sales? In the next couple of weeks, we will produce an updated synopsis from the market commentators, in the meantime here are our initial thoughts:
- The market works on sentiment – we hope that the country bounces back and that people are able to set this incident to one side. That is our fervent hope, but not necessarily our expectation.
- There is a good chance that COVID-19 is here to stay and bounce back after the initial lock down is released. That will dampen the market.
- Buyers have been told not to buy and not to move – they will take that message to heart.
- Buyers will delay buying decisions, many will have been furloughed, a process which, whilst better than redundancy, will not make them any more confident.
- Shared Ownership (SO) customers are often more vulnerable and therefore more likely to be disproportionately affected.
- We think it likely that prices are likely to fall due to the scenario set out above.
- There is an alternative scenario to this, namely that there is pent up demand and under supply given the current moratorium on new build development. In that scenario the market will quickly bounce back.
- On balance we are expecting a flattening of the housing market. How long this will last will depend upon both sentiment and the ability to purchase which in turn will depend upon attitude of the mortgage lenders as we come out of the crisis.
To help our collective understanding of the impacts on the SO and low-cost sales market we have produced a short survey. We would be grateful if you were to complete that survey by clicking here. It consists of 10 short and straightforward questions.
Section 3 – Is there an upside? – What can we do?
Here are a few ideas about how to respond to the scenario we have set out above:
- Where you are in control of the site and tenure mix:
- Turn any unreserved sales plots over to Shared ownership or to rent.
- Turn unreserved Shared Ownership plots to Rent.
- On S106 sites start negotiating variations to tenure with the LPA and your house builder.
- Start talking to developers in a bid to purchase their unsold stock, they may well be prepared to cut a deal.
- For plots likely to complete in the near-term July / August / September – consider flipping tenure now.
- For plots completing in October onwards hold your nerve and market those homes hard as soon as the Lockdown ends.
- Stay in the land market, in our scenario planning there will be land opportunities.
- Retain your team – We expect that the social and affordable housing sector will be called upon to provide a quick infrastructure fillip
- Construction is a vital component of the economy and the Government will want to focus on areas where there is short term benefit. Our expectation that they will look to accelerate housebuilding in the
- social sector and look to councils and RPs to step up provision.
- If there is a sector requirement to increase production, the supply of materials will take time to gear up, revisit off site manufacturer as an opportunity to accelerate delivery.
- Don’t just focus on how you will operate during the lockdown but plan how you will phase gearing up again once the lock down is lifted.