Stick or twist: Covid-19 and the housing market

In times of uncertainty, whether it be political, economical or any other -ical, many homeowners who were perhaps looking to move begin to ask whether they should stick or twist: ride it out in their current home or take the plunge.

Major events such as the COVID-19 situation can have MASSIVE effects on the property market. In fact, coronavirus is said to have “totally broken the UK’s housing market”, with government lockdown procedures stopping estate agents from surveying and marketing new homes or taking prospective buyers to visit those already up for sale. Meanwhile, it is reported that there will be a 5-10% short-term fall in house prices and recovery will be dependent on state of the UK economy.

Demand from UK property buyers has dropped by more than two-fifths, with a predicted 60% decline in the number of sales over the next three months. Zoopla has suggested that a deeper decline will be seen over the next six months as non-essential contact continues to be restricted.

And it’s even more unfortunate that this unprecedented impact has come after two months of strong growth in terms of house price rises, following the decisive result in the general election in 2019.

Lenders too have been hit, with many making decisions to limit mortgage products, and set a lower loan-to-value rate.

So, what does this mean for you as a homeowner?

More than likely, like us, you’re worried. We’ve spent the last four years working on our house, renovating the kitchen, replacing the dated bathrooms, painting & decorating and we’ve even had a rear extension built. All this time, money and effort could go to waste if the house value drops, right?

Not necessarily. We love our home, we finally have it the way we want it, we’re in an area we love, and we have the space we need (we’re feeling very grateful for the extension right now!). Whether our house value goes up or down is irrelevant at the moment because we’re locked into our mortgage and we’re not going anywhere. And prices will come back up as the economy recovers.

But we weren’t looking to move any time soon. If you were planning on selling your home this year, what does all this mean for you? Well, if we return to the question: stick or twist, you’re going to need to stick for now, until we can get a clearer prediction on when and how the housing market will recover.

Bummer, eh?

What if you’re desperate for more space? Maybe your whole family is now at home 24/7, working, playing, learning and it’s feeling a bit cramped.

Is now the right time to start planning a home extension?

Perhaps it is. Conservative estimates for the coronavirus pandemic are currently between 3-6 months with worst case projections being 12–18 months. Of course, this makes planning for the future very difficult but that doesn’t mean you can’t get the ball rolling on improving your home or creating more space.

For a typical home extension project, it takes around three months for plans to be drawn up and fully approved. Once approved (in terms of planning permission and building control), you’ve got three years to start the build.

And if we take a glass-half-full approach, we could look at the fact the remortgage market shouldn’t be affected too much, since there are fewer physical barriers to switching a home loan, with non-physical valuations commonplace. While there may be wariness around the prospect of falling property values, if the loan isn’t too high (for a modest single storey extension you’re looking at between £20-30k), most lenders would be happy to go ahead. And lending rates are at historically low levels so borrowing money to do your project has never been cheaper!

When embarking on an extension project, our advice would always be not to worry too much about whether it adds value or not. Think more about what you need, why you need it and whether more space would solve that problem.

Hopefully things will look very different in three months! And you could have architectural plans ready, so you can hit the ground running when the restrictions are lifted. For any help or guidance, please do not hesitate to get in touch with our team here.