What next for the housing market after coronavirus?
The housing market has been devastated by the impact of Covid-19. Latest figures from the Land Registry and the Office for National Statistics show property prices decreasing in February following January’s buoyant performance on the back of the Boris Bounce. By February, people were starting to look at the wider landscape and worry about the news coming out of China.
The March and April figures are likely to show a distinct change in values as the volume of transactions dries up, which is a much more useful measure of market health than property prices anyhow.
A Lender’s Perspective
From a lender’s perspective though, activity has not fallen off a cliff. At MT Finance, we are still busy and transactions are still being done. We are finding that property investors are far more bullish than homeowners because they tend to take calculated risks better and have a portfolio of property so are prepared to be speculative.
They may take the view that once the world goes back to ‘normal’ and the government props up the economy, there will be a reasonable bounce back. It is different for homeowners as they represent a more nervous side of the market – if lock-down goes on for longer, people will worry about maintaining their jobs, for example.
As far as the wider lending market is concerned, if coronavirus doesn’t make lenders more sensible, then nothing will. Some lenders have let borrowers and brokers down – either they have had their funding pulled, or their potential capacity to lend has been limited as borrowers have applied for mortgage holidays, or a combination of both. They are unsure about the market in the coming year or so and are not willing to take a risk. As a lender you have to be confident in your ability to underwrite, confident in the market and confident that the government will sustain it and bring it back to life.
In the past, we have seen some lenders chase the market and chase volumes – either going low on rate or high on loan-to-value. They have focused on making money in the short term but in the long term that approach may cost people their jobs and that is not fair. As a lender you have a responsibility to your funding lines, your staff and your borrowers.
Going back to ‘normal’
When we get back to ‘normal’, some lenders will return with loan-to-values of 70 or 80 per cent-plus. That’s just the nature of things. Banks still have money to lend and will want market share. Some lessons will be learned, others forgotten. Some lenders will no longer be around, others will come back.
If Covid-19 teaches lenders anything, it is that they must operate with transparency and honesty. This should stand us all in in good stead for when the tide turns. While there is so much uncertainty around, the market fundamentals have not changed, which is reassuring.
If you would like to discuss your property finance requirements, please don’t hesitate to contact a member of our team on 02030512331 or leave your details on our contact form, and someone will be in touch with you shortly.