Home ownership could now be a possibility for those who previously thought never possible.
I’m sure that there’s a lot of people reading this that may have resigned themselves to never being able to afford a home, with getting on the property ladder increasingly difficult for young people without the help of some (somewhat lacklustre) government schemes or financial assistance from parents.
However, with the extreme economic impact of the recent COVID-19 pandemic, we’re going to explore whether now is actually a good time to buy a property and the perfect opportunity to get yourself on that first rung.
First I think it’s important to look at the current economic situation we find ourselves in here in the UK. Interest rates are at the lowest they have ever been in the Bank of England’s 325-year history, and just last week, an announcement of a 2% drop in GDP signifies the worst fall in growth since the financial crisis of 2008.
In addition, we currently have 7.5 million people on the government’s furlough scheme (costing us £14bn a month) and around 1.5 million people unemployed.
First of all, with so many people on furlough, confidence and spending in the economy is greatly reduced – people don’t know if they’ll have a job to go to after the lockdown, and with so many businesses closed – people just aren’t spending the money they do actually have. Add to that the likelihood that wages will remain the same for a long time to come and you’ve got difficult financial situations for most.
Many economists and experts are predicting the UK to enter into a recession very soon, if not, then we’re already in the early stages of one. So, when you look at it all from this perspective – it’s not looking good at all.
There is one silver lining in all this though, and that’s the fundamental fact that house prices are likely to fall, like they do in every recession, as demand is greatly reduced and confidence in the market falls.
Well, many people at the moment agree that it’s too early to tell, but all signs are pointing to a fall in house prices and demand as a result of the COVID-19 pandemic – at some point.
Zoopla’s very own Director of Research & Insight Richard Donnell explains; “What history tells us is that house prices tend to fall when the economy shrinks as a result of falling output. This has a knock-on impact for unemployment or higher borrowing costs – all things that can result in more people forced to sell.”
As people are concerned about losing their jobs, such a big investment is unlikely to be at the top of their list of things to do, and securing a loan from the bank may be impossible for many.
But it’s a certainty that as growth falls and the UK falls into a recession, house prices will fall, but it’s unclear for how long they will remain low. The whole situation is unprecedented in our times, which makes economists reluctant to offer predictions and advice. Nobody really knows how the economy will recover once lockdown is over and thus it’s hard to say.
In an attempt to get a true insight into the state of the property market in Manchester, we spoke to Gagan Khurana, owner of Kaytons Estate Agents who says “Now, with the mortgage rates and interest rates being at an all time low, it is probably the best time to buy.”
“Having been in lockdown for almost two months now, there will be a busy peak for the next two months but towards the end of the Summer when people start going back to work and employees are not offered a furlough option, this is when the market will start to settle or have a slight dip and so for a first time buyer, assuming they have their finances in place, that is the time to buy.”
The uncertainty caused by an end to lockdown therefore seems to definitely be a good sign for first time buyers though. If your job is safe and you have the funds available to buy a property – there’s probably not going to be a better time to make an offer and get excellent value for your cash.
Not only that, but developers and agents will also be looking to offload their properties and make some money after months of nothing – indicating that conditions for buyers will be extremely advantageous.
We spoke to a couple of first time buyers about their experience during the pandemic and it was overwhelmingly positive – with factors that are likely to continue throughout 2020 and present an advantageous position for the buyer.
One first time buyer at CAPITAL&CENTRIC’s Crusader Mill in Piccadilly East (which has experienced the reservation of nearly £3m of apartments since lockdown) explained how she’d “had a better experience that I imagined I would, precisely because of the change of pace“. A good sign that with fewer buyers and less demand, first-time buyers can get themselves a better deal (and with much less stress!).
Sam, who is also buying at Crusader during the COVID-19 pandemic explains how the whole daunting process has been “slightly more arduous due to the uncertainty in the marketplace however in some ways there seems to be more opportunity with less buyers in the market. Hopefully people who haven’t been as badly affected by Coronavirus will be able to find their perfect home.”
And I think that he’s hit the nail on the head there. If you’re lucky enough to be one of those people who won’t be as affected by the pandemic, then this really is the perfect time to get out there and get yourself on the property ladder once and for all.
This is further echoed by Adam Higgins, co-founder of CAPITAL&CENTRIC who explains; “There are signs to be positive about the housing market and keeping the economy on track is also really important to protect people’s livelihoods. We’re back on site building again and actually since the crisis the demand for homes that bit bigger with outdoor space is stronger than ever.”
You should be quick though, as it seems there may only be a short window of opportunity in which all of these factors are beneficial for the buyer and before house prices and demand begins to increase again pretty quickly.
Perhaps use your spare time on lockdown productively and get looking?