In our market, more than perhaps most, we’d all like to think we know what the future holds for us, and there’s probably a raft of data that can be utilised to back up any argument about what’s coming next. Indeed, some of the exact same data is sometimes used to prove quite different arguments.
We recently held an online business update session for our surveyors and one of the points I covered was entitled, ‘What comes next?’ To which my answer was, “I wish I knew.”
The facts of the matter are that even though there are clearly a number of tangibles that we can ‘hang our hats on’ in terms of what we think might be coming over the horizon, there is no real way of knowing because we are in unique territory here.
Take the very basic fact that the UK is in a recession – judged to be the case when UK GDP drops for two consecutive quarters. Now, historically, we tend to know how recessions play out and the impact they tend to have on the housing and mortgage markets.
So a recession normally precipitates greater levels of unemployment, which clearly impact negatively on household incomes, which results in fewer house sale transactions taking place, which results in house prices dropping, and more borrowers going into arrears, and lenders having to make more repossessions.
This however is a pandemic-led recession and, rather notably, it has entered into being with far greater levels of Government support for jobs and household incomes than perhaps ever before. Now we know that this support is not infinite – the furlough scheme finishes at the end of October and we’ve already seen increased levels of unemployment as a result.
The likelihood is unfortunately that more job losses with follow in the short-term albeit with some continuation of Government support – albeit at a lesser level – and there is also support for those businesses who have been asked to close as a result of local lockdown measures.
But, the point is that as recessions go, we have not really embarked upon the normal direction of travel. So, for instance, at the moment household incomes have not fallen by as much as we would anticipate and – it must also be stated – that the impact is very different depending on your job, what sector you work in, etc. Recessions are not uniformly impactful but this one is even further from this.
And therefore, the housing market has not seen – at least not yet – the usual impacts. In fact, it’s actually seen the opposite – so transactions have increased significantly with a considerable groundswell of demand, the supply of property is not exactly high at present so house prices haven’t just maintained their levels they’ve increased, and borrowers who might ordinarily have difficulty paying their mortgage in a recession have been able to take advantage of mortgage payment holidays and the like, to prevent getting into arrears and to keep the lender from the door.
Now, of course, we are not saying that some of the more ‘traditional’ recession touch points won’t appear but (at present) there is no evidence of the housing market slowing down and the short-term outlook continues to look positive.
Take house prices, for example. During lockdown we had various predictions – even from the Government itself – of up to double-digit falls once the housing market reopened. The most recent statistics for September however show a 5% annual increase according to the Nationwide and 7.3% according to the Halifax; monthly figures are 0.9% higher according to the former and 1.6%, the latter.
And, as mentioned, unless the supply of new property being built and/or new property coming to sale to market, increases dramatically, or demand trails off significantly – neither of which are likely anytime soon – then prices should not just be sustained but continue to tick upwards.
To put this into context further, September was the busiest month SDL Surveying has ever known and there are no indicators our activity levels are going to change – certainly not in 2020 or the early parts of 2021. Many suggest the end of the stamp duty holiday will precipitate the end of the market as we currently know it – and they might be right to some extent but there’s no doubting this Government needs a fully-functioning housing market, it needs the employment it generates, the retail activity it delivers, and the taxes it can put in the Treasury’s coffers.
There will be much it will want to do to ensure that continues for as long as possible. So, while there may be some doom-mongers who envisage the end of the world as we know it next year, currently like Michael Stipe, ‘I feel fine’.
All stakeholders should be riding the activity we currently have, capitalising on the market share we have grown and the increased revenue we are generating, and enjoy this period. It will not be the same forever but there is plenty to be positive about not just now but into a future which is always going to remain uncertain. But when has that ever been any different?
Simon Jackson, Managing Director at SDL Surveying