Updated 03 December 2020
The government has reopened the housing market in England, so long as all parties maintain social distancing. Here’s what you need to know if your buying, selling or remortgaging your home. Article by Nick Green.
Having been put on hold since the beginning of April, the property market has been given the green light – in England, anyway. People will once again be allowed to view properties and move home – which in turn will enable them to secure mortgage deals, make and accept offers, exchange contracts and carry out all steps of the conveyancing process.
It’s estimated that the move will unblock £82 billion worth of property transactions and let nearly half a million buyers and renters to put their plans back into action. Announcing the relaxation of the freeze in England, Housing Secretary Robert Jenrick said, ‘[This] will enable people to move home safely, covering each aspect of the sales and letting process, from viewings to removals.’ He also reminded buyers, sellers and agents of the need to follow social distancing and safety rules.
Prospective buyers and sellers have not been deterred by the temporary shutdown of the property market. Though some may have put their plans on hold due to economic uncertainty, there is plenty of pent-up demand.
Enquiries to Unbiased seeking a mortgage broker have more than doubled compared to April (up 117 per cent), and such requests are up by over 60 per cent in just the past week. The strongest surges are from those looking to sell one home and buy their next (up by 164 per cent), but first-time buyers are not far behind, up a remarkable 144 per cent compared to last month. Interest in buying to let has also soared, with a 25 per cent rise since restrictions were relaxed.
Mortgage broker activity has soared by similar amounts, indicating that most of these prospective buyers are finding the advice they need to get their plans moving again.
Since the start of the lockdown it has not actually been illegal to proceed with a house move, but the guidance has been that only urgent transactions (e.g. those that might result in someone being made homeless) should proceed. With the lifting of most restrictions in this area, both existing (paused) transactions and new ones can go ahead largely as normal in England.
If all properties involved are based in England, you can proceed to view, buy, rent or sell homes and commercial buildings as before, provided that everyone involved follows social distancing measures. This means:
The limited relaxation of the lockdown on the property market also means that:
Estate agents will have their own individual policies on viewings. It’s likely that the frequency of viewings may be reduced in some instances (for example, if the occupants prefer to be out of the house when viewers come – particularly advisable if the sellers are in a vulnerable group). Where possible, some agents may prefer to conduct first viewings virtually, with second viewings done in person, to reduce footfall.
With regard to remortgaging, this has been possible in some instances already, thanks to remote ‘desktop’ valuations by lenders. However the process should now be possible in England even if physical valuations/surveys are required.
The devolved governments of Scotland, Wales and Northern Ireland have chosen not to follow the lead of Westminster, and so the freeze on the property market remains in place in all other parts of the UK. This means that physical home viewings in these countries are not permitted, though virtual viewings may be if estate agents offer this facility. Land registries are also either closed or running a reduced service, so it is unlikely that sales will be able to proceed other than in exceptional circumstances.
Remortgaging, however, may still be possible, if lenders are able to carry out remote valuations and no new surveys are required.
The government has also issued new guidance aimed at getting the building of new homes moving again. It allows for extended working hours to resume at construction sites, and for the planning system to operate once more on a remote basis.
The government has also launched a ‘safe working charter’ to enable home builders to return to work. The aim is to try and maintain the flow of new properties onto the market, as too long an interruption could artificially inflate prices and hamper efforts to get the market moving again.
It would be over-optimistic to suggest that the housing market will simply pick up where it left off. Financial security and optimism are key factors in people’s decisions to move home, and both have taken a massive dent in the past few months. Many people’s income is now less secure, and many more face an uncertain future. More broadly, there are question marks over the whole UK economy. Therefore, savings that people have built up to buy their next home may now be at least partly diverted into emergency living funds.
A further problem is that many first-time buyers will have been saving up their deposits in stocks & shares Lifetime ISAs. The COVID-19 crisis caused a massive crash in the stock markets, and despite some clawback, investments are still nowhere near their previous value. This will have taken a big chunk out of many people’s potential deposits, unless they were prudent enough to switch to cash in the months before moving (always a good strategy).
Furthermore, despite record low interest rates, mortgage providers will also be asking more searching questions of applicants. So if you have been furloughed, or if your employer or business may be affected in the long-term by the crisis, their terms may be less generous (if they grant a mortgage at all). Even applicants in apparently rock-solid employments may face tougher affordability criteria, since the economy as a whole is expected to shrink this year.
The upshot of this is that buyers may negotiate harder to try and lower the price of homes. If this happens, it will have a knock-on effect up the housing chain, since sellers will be less able to afford a lower asking price unless they in turn can get a lower price on their next property. This kind of behaviour in the housing market can often lead to a ‘Mexican standoff’ between a buyer, a seller, and the next seller up the chain – with the result that all three (or more) have to wait until one of them cracks and changes their offer.
It’s therefore likely that the housing market, though officially ‘unfrozen’ in England, will take some time to thaw out. Sellers may still have fixed ideas of what their home is worth, and be very reluctant to revise their expectations downwards. Ultimately, however, a property is only worth what someone is willing to pay for it.
On the other hand – because human behaviour in unprecedented circumstances is near-impossible to predict – the market may benefit from the sudden opening of the floodgates. The effect of turning loose around 450,000 frustrated buyers and sellers should not be underestimated, and it could well be that the abrupt spike in competition will keep house prices buoyed up to some extent.
If there are any winners from this, it may be those first-time buyers whose finances have not been hit by COVID-19, who now have perhaps their best chance in years of negotiating a lower asking price for their first home.
The unfreezing of the market is an important step, but it will certainly not be business as usual. The challenging process of buying a home is now even more of an uphill struggle, so first-time buyers in particular will need all the help they can get.
If you’re buying a home, you can test your mortgage application with our free tool, get tips on improving your mortgage prospects, and – most importantly – find an independent mortgage broker to maximise your chances of getting the size of loan you need.
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