The real estate market is at its best. Last July has been the most active in the last decade, reaching a record £ 37 billion in sales
On the same day that it was announced that the UK had entered a recession (the first in eleven years), Paul Conney, director in Chiswick of the real estate company “Horton and Garton”, received three offers for a four-bedroom house, located in the affluent South West London neighbourhood. It sold for more than the million pounds that sellers were asking for. It was only on the market for two weeks. In the British capital, it has always been said that it takes longer to decide to buy a pair of shoes than a house.
“I am experiencing the most hectic period of my 13-year career. At this time of year, the sale of 14 or 15 properties is a good season. But since the confinement ended on May 13, we have sold 24 homes,” he explained. “It has taken us all by surprise, really,” he adds.
Recession, pandemic, unemployment and possible hard economic Brexit in January (London and Brussels continue negotiations, without much progress). And yet, the real estate market is experiencing its best momentum. The past month of July has been the busiest of the last decade, with the value of property sales reaching a record £ 37 billion, according to Rightmove, the shopping and rental portal par excellence.
Sales were up 48% compared to the same month last year and were 20% higher than the previous record recorded in March 2017. And the momentum continues into August, with the latest weekly figure showing an increase of 60% of operations.
People buy, buy and buy
The numbers, a priori, do not match the reality that is being lived in the country. Around 730,000 people have lost their jobs in the first four months of the covid-19 crisis, the Government will unplug in October the aid from the ERTEs (from which 9.5 million employees now benefit), the GDP between April and June saw a historic 20.4% drop, and home prices are forecast to fall later this year and early 2021. But people buy, buy and buy. What is happening?
“The market has been very stagnant for the last four years as a result of Brexit, ” explains Conney. “There were some mild peaks based on what was happening with the Westminster debate and the negotiations with Brussels, but in general, there was a lot of uncertainty and we at least did notice a considerable drop in EU buyers. After the December elections there was a boom with the ‘Boris effect‘, but the pandemic quickly arrived and everything changed again,” he says.
With the covid-19, the visits had to be cancelled. Everything was ultimately paralyzed until May. With the “new normal”, Conney reopened the office, but could never have foreseen the frenzy in which he is now involved. “Confinement has made many people rethink their lives. They want bigger houses with open spaces. And after a long season of uncertainty, first because of Brexit and then because of the virus, many believe that they no longer want to postpone their plans. They are tired of waiting. It is true that prices are going to fall, but if you buy a house it is to live for at least five or ten years, so by then the market should have stabilized ”, he assures.
According to a survey, one in seven workers (around 2.3 million people) believes that they will never return to the office, while more than nine million think that they will continue working from home, at least for a long time. In economics, the psychological factor plays a major role. The desire to want to move quickly because you need more space may be more important than waiting for prices to drop before another possible lockdown.
Although the “Rishi effect“ also plays an important role. The Treasury Minister announced in July the elimination of taxes on the acquisition of real estate up to 500,000 pounds. Outside of London, one can find interesting houses for this price. And for those that exceed it, the measure – which will be in force until March 2021 – represents a saving of 15,000 pounds. Following the announcement, the number of applicants who have registered with realtors for houses between £ 500,000 and £ 750,000 is 92% higher than last year.
On the other hand, interest rates are at historic lows and there are many people for whom the confinement has not meant anything other than greater savings, so now they also consider that it is a good time to make the move.
The exodus from the cities has helped drive prices to record levels in Devon and Cornwall (south-west England), while in the British capital they have fallen by 2% month-on-month and some owners have chosen to put their flats on the market following a drop in the number of tourists and students. However, the monthly drop across the UK of 0.2% is less than the 1.2% average typically seen at this time of year when activity slows down as the summer winds down.
Miles Shipside, director of Rightmove, says that “there have been many changes as a result of the unprecedented pandemic that has led to the rewriting of seasonal forecasts.” “Apart from all the operations that have been carried out suddenly after the plug that was formed by the suspension of the market during the confinement, there is an additional demand due to all those who precisely because of the confinement have changed their priorities and are now looking to move.”
This is the case of Paul. They lived outside London in a small two-room house. In the midst of the pandemic, their first child was born and for a week they have been in their new home, a property a little further from the center, but with four rooms. “With the child and working from home, they have been crazy months. We were clear that we needed more space and whenever we could we would move”, he says.
In any case, economists predict that it is only the calm before the storm that is expected from autumn when, despite fears of a new wave of covid-19, the Government will disconnect the aid from the ERTEs and the “mortgage holidays” to facilitate that those who suffered financial difficulties due to the pandemic could delay payments for three months. With regard to prices, some banks, such as Metro Bank, warn of a drop of up to 14.6%.