In our July blog we wrote that The Market is Recovering, and the Race is On! but it’s that fast paced in an ever changing world that we now need to look at the implications of what’s happened over the last couple of months.
The market buoyancy continues but how has the impending second wave of coronavirus impacted activity?
Here we will look at the current state of affairs in the property market and how we see things playing out over the coming months.
The good news is that the market recovery we reported in July isn’t showing any signs of slowing down and activity continues to gather pace.
One primary reason is pent up demand. During lockdown the housing market effectively shut down with viewings on hold and people unable to leave their homes in order to move. The other issue was confidence – what was going to happen in the market and how would the situation impact household finances?
Uncertainty always leads to inactivity and can negatively suppress any market.
Now the housing market is bouncing back thanks to a flurry of activity that in normal times would have happened over a period of months. In July we saw everything happen at once, and it continues.
Rightmove has indicated that the number of sales occurring within a week of a property being listed is higher than at any point within the past decade – 1 in 7 listings. Additionally, nearly a third are gone within two weeks. Buyers are acting fast to secure the properties that they want.
Another effect of lockdown is how it’s made people think about their requirements as we continue moving into a new way of living. Increased remote working and the uncertainty over when, or even if, working practices will return to pre-Covid ways is making people re-consider what they need from their home.
With more people working remotely there’s an urgent need in many people’s cases for more space. Especially given that partners and children may be spending more time at home too, workers who worked from home pre-pandemic will also be realising a need for more space, not just those new to homeworking.
Savills conducted a survey which showed that 74% of respondents have reconsidered their work-life balance as a result of the pandemic. With 38% of respondents significantly more inclined to work from home than before.
This almost instantaneous change of needs for many is a key reason activity isn’t slowing. A vast array of homeowners now need something different.
So on the face of it the market is thriving. For many though, it’s unfortunately not quite that simple.
We are now facing a long recession and finance is already becoming hard to come by – especially for those without sizable deposits.
Even first-time buyers are now struggling to get mortgage deals without putting down at least 20%.
Data from Moneyfacts at the start of September showed that borrowers able to offer 10% of the value of a home had the option to choose from around just 60 deals. That’s a sharp contrast to March when borrowers could have chosen from 779 deals, Moneyfacts stated.
Across the financial industry it seems credit is getting tighter with banks being much more cautious about who they lend to. Some have already openly stated that they won’t grant mortgages to those on furlough in the absence of a firm return to work date.
The lack of finance in the market plus the pent-up demand is causing frustration for many who simply can’t get the mortgage deals they want quickly enough to secure a new property.
As always at Property Deal Store, we want to focus on the potential opportunities for our investors.
For years homebuyers, particularly first-time buyers, have had the backing of the government and to some extent lenders, with the treasury often and significantly punishing investors.
The current market situation as we’ve described here could provide a natural shift in the opposite direction.
Renters may have trouble sourcing finance or indeed the ideal property to buy, leading to more rental demand. Equally some homeowners may see this as an opportunity for a quick sale and may decide to move into rented housing until life and the economy gets more comfortable. Both these scenarios present an opportunity for landlords to provide high quality housing to a new market of tenants..
In addition, looking at the finance side from this perspective, if regular mortgage deals get harder and harder to come by, which we expect they will, cash buying landlords may have an even bigger advantage than normal.
People desperate to sell to move into a more suitable property given how life’s changed may be a source for finding a bargain investment property.
If you keep a positive outlook and a close eye out for some new opportunities, it could be an exciting few months ahead in terms of investment opportunity. Let’s hope too that life starts to move back towards normality at the same time.
At Property Deal Store our database continues to grow, deals are being sold, and we’re working closely with our regulated sourcing agents to keep the momentum going.
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-Janice Minihan, director and co-founder of Property Deal Store