Statistics show the damage done to the real estate market by COVID-19
When the United Kingdom went into lockdown on March 23, in a bid to quell the spread of the Coronavirus, the real estate industry was hit hard. Both the residential and commercial property markets were frozen, as house moves – unless contracts had already been exchanged – were deemed non-essential, and businesses scrambled to adopt mass remote-working policies and offices emptied.
As estate agents open their doors again this week, and construction restarts, here we look at the key statistics that highlight the impact and cost of COVID-19 on the real estate industry in the UK.
373,000: Number of property transactions, worth £82 billion, stalled in the UK – but is it more?
Iain McKenzie, Chief Executive Officer of The Guild of Property Professionals, says before the lockdown the residential house market was on the up. “The housing market surged following the general election victory and Brexit resolution,” he says. “There was a wave of positive consumer sentiment during the beginning of the first quarter with an increase of 0.4 per cent in transactions volumes in the UK.
“The average property of property in England and Wales in March was £232,648, which was up by 1.3 per cent during the same time last year. Compared with the first quarter in 2019, it was also taking four days fewer to secure a buyer.”
He continues: “However, the [effect of the] lockdown and the pause button on the housing market is now starting to show in the statistics. Around 373,000 property transactions have stalled, and one in seven mortgages have been granted payment holiday days.”
Zoopla quotes the same figure – 373,000 – and suggests those halted transactions have a combined value of £82 billion. On May 13, though, the Government’s Housing Secretary Robert Jenrick said more like 450,000 property transactions had been left in limbo since lockdown.
80: Percentage of surveyors that have seen deals fall through in April – and the market could take almost a year to recover
House prices could take nearly a year to recover from the fallout of the coronavirus pandemic, according to The Royal Institution of Chartered Surveyors, which released its latest findings on May 14. The RICS research found, on average, its members expected prices would only recover their pre-lockdown levels in 11 months’ time.
Some 80 per cent of Britain’s property surveyors have seen buyers and sellers pull out of transactions in April. A net balance of 96 per cent of surveyors reported a drop rather than an increase in new properties coming on the market, marking the weakest reading since this RICS started asking this question in April 1999.
Further, three-quarters of surveyors expected prices to fall when the market reopened, with 40 per cent predicting a drop of more than 4 per cent.
“Not surprisingly, the latest survey shows that housing activity indicators collapsed in April reflecting the impact of the lockdown,” said Simon Rubinsohn, RICS’ Chief Economist. “Looking further out, there is a little more optimism, but the numbers still suggest that it will be a struggle to get confidence back to where it was as recently as February.”
56,421: Number of real estate and property businesses in significant financial distress
The Begbies Traynor Red Flag Alert for Q1, published in mid-April, showed that over half a million organisations in the UK (509,000) are in “financial distress” – primarily because of the impact of COVID-19 – and over 10 per cent of those stricken businesses are in the real estate and property industry. The number, 56,421, marked a 17 per cent increase compared to Q1 2019, and was the most substantial rise across all sectors.
“Coronavirus has severely impacted both the residential and commercial property market, effectively grinding it to a halt,” said Julie Palmer, Partner at Begbies Traynor. “With the number of businesses in significant distress increasing by 6 per cent to 56,000 in the first quarter of the year alone, we’re expecting an even bigger increase when we next take a look at the readings for Q2.”
63: Percentage of Brits willing to live up to an hour away from the office – double the amount that currently do so
Stats released by O2 Business in early May show that both employees and employers expect working life to alter after lockdown, with almost half (45 per cent) predicting a permanent change to bosses’ approaches to flexible working. On May 13 Twitter Chief Executive Officer Jack Dorsey gained worldwide praise by offering staff at the social media giant the option to work from home “forever”.
The trend for home working is likely to transform both the commercial and residential property markets in the UK, the O2 Business study, The Flexible Future of Work, suggests. Indeed, 63 per cent of Brits would be willing to live up to an hour away from their office – double the number that currently do so – if flexible working becomes more widely adopted.
However, almost a third of people (30 per cent) admit to being lonely while working from home, and 26 per cent miss socialising informally with colleagues. A lack of social interaction, it seems, will be the biggest challenge to flexible working.
“The Flexible Future of Work shows us how the demand for flexible working and the role of technology in our working life is accelerating during the lockdown, and how this might shape the future of the workforce,” said Katy Liddell, Director of Business Sales and Service at O2.
“What’s clear is the ever-critical role connectivity will continue to play in our working lives going forward, wherever we are working from. With more of us working flexibly than ever before, for most businesses, digital infrastructure has become more important than physical infrastructure. In the face of this, businesses must continue to evolve to meet the changing needs of their workforce to ensure they continue to attract and retain talent.”