SIMON LAMBERT: How do you deal with a real estate market where people cannot leave the house and sales are expected to drop by as much as 80%?
How do you deal with a real estate market where people are not even allowed to leave the house, let alone look at it?
That’s the problem that is currently causing headaches for brokers, mortgage brokers, banks, and construction associations – and buyers, sellers, and people who have to scratch home soon.
People are not allowed to view properties, ratings and surveys are disabled, and those who need to complete a new home will struggle to move home but are locked into their purchase.
Spring is the time of year when the real estate market sees a stream of potential buyers and sellers, but this year people are not supposed to leave their home instead of trying to sell their home.
We are less than three months into 2020, but it seems that brokers long ago wanted to brighten up the New Year’s market with a conversation about a Boris Bounce.
Despite the obvious post-election hype, real estate agents and commentators were on to something.
When Britain returned to work in January, the real estate market had a clear swagger.
Homes that had been on the market for centuries were listed, new homes listed and sold quickly, and those looking to view real estate found the broker’s weekend schedule fully booked.
Because potential sellers had previously been on their hands because of Brexit, agents were short on property and encouraged people to have their home listed now if they wanted to sell.
Some did, but many thought they would wait for the traditional springtime pickup instead, when the market sees a surge of activity just before Easter.
Instead of trying to sell their house, they should not leave the house.
As with many elements of the coronavirus crisis, this is an unprecedented situation in peacetime.
Even during the financial crisis, when banks and building associations were taking out mortgages en masse, it was still possible to view and buy a home if you could find the money.
I was in school during the collapse of the real estate market in the early 1990s – so I’m too young to remember much of it, although I remember friends whose families were hit hard – but even in that long slump, properties were still bought.
It’s hard to imagine a lot to be offered in the coming month, though I’d bet some brave souls are trying to take advantage of an almost complete lack of competition.
Property listing site Zoopla today predicted that housing transactions will decline by 60 percent over the next three months and that individual spring months in agreed sales may decline by 80 percent compared to last year.
It also reported that the “fall-throughs” on agreed sales last week were 60 percent higher than the previous week, although newly agreed sales still exceed them by four to one.
Real Estate Listing Zoopla reported today that interest in homes for sale online has plummeted in the past week
Predicting the future is a mug game, but it seems fairly likely that many more people will stop selling in the coming month, with some concerns about prices after lockdown compared to if they accepted an offer.
At least they have a choice, while for two other sets of buyers there is a bigger problem.
Most urgent is the problem faced by those who have exchanged contracts and will close within three weeks, or where it is suspected that they will continue.
They could theoretically move home, but moving companies cancel jobs and it’s not clear if the lock is tightened and if removals are banned anyway.
There are also buyers and sellers who are about to exchange contracts, but once that is done they are tied to the sale, the price, the completion date and if they withdraw they owe the other party a fee.
It seems as if in this completely new situation the real estate market needs a new idea as soon as possible.
Perhaps the Law Society and the lawyers should come up with some form of pause agreement, which means buyers and sellers will get the guarantees and flexibility they need and a wave of sales won’t go through.
We’ve already heard talk of the possibility that both sides agree to extend the completion and special ‘complete when practical’ clauses, but the anecdotal evidence I hear is that most people’s lawyers simply say ‘don’t trade’ .
That’s wise advice in the face of uncertainty, but if we want the real estate market to continue wherever it left off, buyers and sellers urgently need more clarity.