Coronavirus & The Housing Market: In Context
COVID-19 has clouded our vision. It’s easy to lose sight of the bigger picture, so let’s zoom out, clean our blinkers and take a look at the whole situation in context.
Fear, panic, worry, knee-jerk, worst-case scenario…
These are some of the many words that come to mind when we think of anything that’s been affected by Coronavirus, and the property market is no different. But let’s take a fresh approach to this, let’s look at all this in context and put things into perspective, shall we?
As a peer-to-peer property lender we believe there is plenty to be encouraged by so let’s begin by turning our attention to the economy and property market prior to the pandemic.
A strong economic standing
It’s hard to think back to when we were travelling on public transport, squashed shoulder to shoulder between our fellow commuters. Or even heading down to your local pub, favourite restaurant or coffee shop for that wake me up start to the day.
Life before COVID-19 feels like a lifetime ago, doesn’t it?
But It’s only really been just over a month since the UK went into lockdown, and before then the economy was actually doing pretty well.
According to Halifax, property prices were up 3% year-on-year in March 2020, indicating a very clear upward trajectory.
The housing market was performing well prior to COVID-19.
Let’s also remember that the Office of National Statistics recorded record levels of employment between December 2019 and February 2020 at 76.6%.
Furthermore, a growth of 0.1% in UK GDP in February of this year marked the beginning of an upward shift in economic momentum after a brief period of flatlined movement which was inevitably caused by Brexit uncertainty.
Even in the aftermath of Brexit, the UK economy remained buoyant and galvanised despite a wall of pessimistic predictions and bleak fiscal forecasting.
A wave of Boris-bounce optimism followed the 2019 general election only to be quashed by a global virus thrashing its way from China to UK shores.
It’s important to make the point that, unlike the 2008 crisis, this current recession was not born out of a flawed economic system. Our economy, as we’ve highlighted, was doing well and not a victim to subprime mortgages. Let’s keep that in mind.
This recession we’re living through right now has been created by a completely unrelated force. An act of God. It is indeed a recession, and a deep one in the short-term, but it is a blip in an otherwise strong economic standing.
A rebound ahead
Nationwide says that economic policy will contract significantly in the short-term, but has forecasted a strong rebound once it passes.
The British building society also suggests that the government’s Coronavirus measures mean that the impact of COVID-19 on the housing market may be much less damaging than many expected.
Estate agents, Knight Frank predicts that UK property prices will fall by 3% this year following COVID-19 but then bounce back strongly to 5% in 2021.
Savills are also confident of a swift recovery after reaffirming Oxford Economics’ prediction of a growth of +1.8% in GDP by the latter stages of this year.
This week The Business Desk has also informed us that North West housebuilder, Redrow will begin to reopen its construction sites from May 11th.
This makes for encouraging reading for those involved in property development and secured peer-to-peer property investments.
Business as usual
This is a short-term, albeit deep, recession, there is no denying that. But we head into this recession with a strong underlying economic base. We head into this pandemic with a strong foothold.
We resurfaced strongly following Brexit due to the solid economic position we had going into it, and we will emerge from this economic swamp for the same reasons.
When we get over the hump of this virus there will be an even greater shortfall on the government’s targeted 330,000 new homes required. We continue to be advised by our professional partners that post September, if the unwinding of the lock down is handled effectively, we will once again have a strong economy with solid foundations to enable us to push forward.
Uncompleted P2P development projects will therefore need to be finished. And due to this shortfall and the pressure-pot of housing demand, completed projects should therefore sell, especially as The House Crowd’s developments are affordable (and based on economic fundamentals) and they are focused on The Northern Powerhouse, part of the Government’s industrial strategy.
At The House Crowd, we have used this period to strengthen our own processes. We have appraised our risk appetite, underwriting processes, our professional legal and valuation partners, our loan monitoring and our recovery processes.
As such, we are confident that the peer-to-peer property investing opportunities we will offer in the coming weeks and months will be well worth considering.
It’s business as usual.