Coronavirus is a global pandemic. Governments are shutting down public offices and businesses are offering reduced services. Many workers are being advised to stay at home. It’s evident that the coronavirus will impact the property industry.
Agencies, mortgage lenders, landlords & tenants will be impacted.
The fight for everyone to keep themselves & loved ones in good health will be the priority for sure.
This article discusses the coronavirus impact on the property market. We cover how key stakeholders will need to adjust while the virus is contained, delayed & overcome.
Coronavirus impact on the rental market
The short term letting business will take the biggest hit. Reductions in travel are already being implemented. President Trump has already restricted flights from 26 European countries.
With less travel, there will be less tourism. Those operating Airbnb type lettings will see a reduction in letting requests.
Rental income will reduce and therefore losses will be made. Prudent landlords will have hopefully built up reserves, to manage mortgage repayments. Those who didn’t plan ahead may start defaulting and face financial difficulty.
Coronavirus impact the property workforce
Where possible, many office workers are being requested to work from home. Estate & letting agents may need to follow suit.
First & foremost, agents should be ensuring they have the capability to allow their staff to work remotely.
Documentation & email follow up are reasonable tasks that may be completed from home. However viewings are of course a different story, which increases potential exposure.
There is likely to be a pause or extreme reduction in transactions taking place in the interim.
Current deals may also be at risk due to the supplier chain. Solicitors, conveyancing & lenders will have their own workforce issues. This will result in delays in paperwork, checks and other activities related to completing a sale/let.
Estate & letting agent owners
Bills & salaries still need to be paid. With income likely to take a hit, this will mean some agents feel the financial strain. UK businesses are appealing to the government to offer some solace during this turbulent period.
Incoming Bank of England governor Andrew Bailey commented on this issue.
He said the government is likely to provide loans to small and medium-sized firms to help them deal with supply chain disruptions from the coronavirus outbreak. “I think it is quite reasonable to expect that we are collectively going to have to provide some form of supply-chain finance,” he said.
Coronavirus impact to property prices
There is unlikely to be a major impact on UK property prices, if predictions on the virus’ behaviour prove true. China, where the virus began accounts for over 80 percent of cases and deaths.
However the cases in China peaked and began declining more than a month ago. This is according to the epidemiologist who led the World Health Organization’s (WHO) coronavirus mission to China. Fewer than 200 new cases are reported daily, down from a peak of 4,000.
Furthermore, we are approaching warmer weather in the UK. Most, if not all, respiratory viruses hate hotter temperatures. Hotter countries such as Latin America and Philippines to date have only incurred a small number of cases.
Both the expected pattern of behaviour & hotter temperatures indicate the virus may be short lived. Thus this means property prices will not be impacted post the course of 2-3 months.
The notion of limited impact isn’t guaranteed. It’s based on a majority of businesses being able to overcome the period of low productivity expected over the coming months.
If there are business closures across various industries, the longer term effects on the property market could be substantial.
Coronavirus impact on the property industry: Landlords & Rent
Thousands are expected to be sick as the virus reaches its peak.
Victims with the virus will likely be actually sick for 3-5 days, then require a quarantine period of 7-14 days.
Rishi Sunak, Chancellor of the Exchequer, made changes to the sick pay system Sick pay requirements vary from firm to firm. A large volume of employees will have contracts that allow a period of time off sick while still receiving sick pay. However, self isolation is not “sick”, therefore not always eligible for sick pay.
That decision will be down to the employer. The employment conciliation service Acas said it was “good practice” to offer contractual sick pay in cases of self isolation.
For workers that do not have a contractual period of time paid in full, statutory sick pay is an option.
Not eligible for those that are self employed, statutory sick pay pays at £94.25 a week.
Employees will have to ensure they assess their eligibility for statutory sick pay, as there is a defined criteria that needs to be met.
Evidently, with a reduction in income, many will find it difficult to keep up with rental payments due to the coronavirus.
Landlords may have to offer grace periods to tenants based on the current environment.
Coronavirus impact on mortgages
As stated above in the article, agency owners & landlords are at increased risk of being unable to make mortgage payments.
Depending on how widespread this financial issue spreads, the government may need to intervene.
In Italy, the government has placed the population on lockdown because of the coronavirus outbreak. As a result, the country took the unprecedented decision to suspend mortgage payments.
There is the potential for the UK government to follow suit, depending on how the impact of the virus spreads.
The cut in UK interest rates
The Bank of England announced an emergency cut in interest rates. In response to the coronavirus outbreak, rates have been slashed from 0.75% to 0.25%. This took taking borrowing costs back down to the lowest level in history.
For businesses, this frees up billions of pounds of extra lending power to help banks support firms.
The rate cut will reduce the mortgage repayments of homeowners on tracker mortgages.
For savers, this means little as the already low returns will go that ever more lower.
Its clear that there the coronavirus impact on the property industry will be widespread. Business & individuals need to be prepared to stay healthy. Secondly, they will need to keep themselves afloat financially. Media coverage is widespread and patterns of difficulty will be monitored by the government closely. Developments will occur in the coming weeks for sure.