The COVID-19 global pandemic that swept the UK – and the world – earlier this year has evidently had a huge negative impact on people’s lives, as well as heavily impacting many industries and businesses.
One of the areas to have been worst affected, however, may well be the UK property market.
When the country was put into full lockdown toward the end of March, many businesses had to close and cease operations until further notice.
Effectively, this resulted in the property sector grinding to a halt, which created many difficulties for sellers, buyers, estate agents, and others involved in property transactions.
What Has the Government Done?
As the virus swept the country, we saw the UK Chancellor, Rishi Sunak, bring in a range of measures to protect certain industries as well as safeguard jobs.
This included a cut in VAT for hospitality businesses, the furlough scheme for workers, and various other financial packages that cost the country billions of pounds. According to the Institute for Government, the Chancellor’s July ‘Plan for Jobs’ alone adds up to £30 billion.
However, when it came to the housing sector, the government has done little to help buyers and sellers.
There was a delay on evictions for those who found themselves falling behind on rent or mortgage payments because of their financial situation.
However, this was designed for those already living in a property, whether rented or as a homeowner. Those involved in buying or selling property, on the other hand, have been left wanting for a helping hand.
In fact, the government took no action to buttress the real estate sector beyond the stamp duty holiday, which was brought in on 8th July – several months after the pandemic had created huge problems for buyers and sellers – and is not retroactive.
The stamp duty holiday is set to remain in force until the end of March 2021, although whether this will change based on the ongoing situation remains to be seen.
Loss of Deposits
One of the major issues that has affected buyers as a result of the pandemic is the loss of substantial exchange deposits transferred when contracts were exchanged.
These deposits are designed to provide reassurance that the buyer has no intention of pulling out.
However, this is exactly what many buyers had to do after the exchange deposits had been paid, and this was not through choice.
The reason why many buyers had to pull out, even after the exchange of contracts, was that their mortgage provider pulled out of the offer of a mortgage. Subsequently, buyers had no other option but to pull out, even though it meant losing tens of thousands of pounds that had already been transferred in exchange deposit fees.
Withdrawn Mortgage Offers
With no protection put into place by the government, this now leaves these buyers in limbo, with no idea of if and when they may get compensated for these financial losses. For many young and first-time buyers, the financial setback could keep them from attempting to buy again for years.
The sudden reversals are all the more traumatic because, prior to the onset of the pandemic, many of these buyers had received offers in principle from mortgage providers that were subsequently withdrawn because of the financial impact of the pandemic.
This has affected both buyers and sellers, as it ground the entire buying/selling process for thousands of transactions to a halt.
Lack of Affordable Mortgage Products
Looking ahead, a serious problem affecting these and other first-time buyers will be the lack of affordable mortgage products available in the wake of COVID-19. Many lenders have withdrawn or capped higher loan-to-value mortgages, closing homeownership doors for many people.
Of course, it is not just the lack of affordable mortgage products that is having an impact on first-time buyers. Many have either been furloughed on 80 percent of their wages or have lost income and jobs over recent months.
This has dashed their dreams of being able to get into the property ladder, as it means they can no longer afford the deposit or the mortgage repayments. In addition, it means that many will no longer qualify for a mortgage because of their situation.
Many industry officials have warned that unless this situation changes, it will be far more difficult for the property sector to recover from the impact of COVID.
While some lenders did start to bring back more affordable deals over recent weeks, the rise in COVID cases across the UK means they are likely to disappear. First-time buyers are now looking at deposits of over £24,000 on average based on a 10 percent deposit; for deposits of 15 percent, the deposit shoots up to over £36,000.
Without action on the part of the Government to stabilize the availability of credit, and on the part of the banking sector to make more affordable mortgages available, the impact on the property sector as a whole could be devastating.
A Resurgence in COVID Cases
Sadly, the UK – like many other countries – is now seeing a resurgence in COVID cases. Recently, the number of cases per day has rocketed, hospitalisations have increased, and the death rate has risen.
This has resulted in the Prime Minister, Boris Johnson, enforcing new stricter measures with further tightening of the rules to come.
There is no doubt that this will have a continued negative impact on the property sector, and many buyers and sellers who thought things were getting back to normal will be hard hit.
The worsening state of the health crisis in the UK makes it all the more essential for the government to take steps in order to help those already affected during the initial outbreak, as well as those that will be affected this time around.