Last year wasn’t exactly filled with fun for everyone but some sectors definitely weathered it better than others. So far, housing has been one of them. Here’s a quick look at how the pandemic has changed the housing sector and what that could mean for the future.
Real estate is going virtual
Real estate has been very slow to adapt to the virtual world. Prior to the pandemic, it didn’t even make the most of the sales and marketing opportunities offered by the internet. For all the online portals became the place to start looking for a home, they were essentially just digital versions of the old classified adverts.
The pandemic forced the industry to adapt. It also forced regulators to let it. One of the major reasons why the property market used such archaic processes was because regulators had concerns about digital security. These were and are valid but they overlooked the fact that the existing processes also had security vulnerabilities.
Now both the industry and the regulators have had a taste of going fully virtual. This is not looking very likely to be the way of the immediate future. It is, however, looking increasingly likely that the property market will adopt a hybrid working model. This could reduce costs and increase efficiency, thus benefiting everyone.
Business is booming for mortgage lenders
The phrase “rollercoaster ride” is a major cliche but it’s really the only fair way to describe the mortgage-lending market over the last year. When the first lockdown hit, mortgage lenders were classed as non-essential and forced to close. Then they had to figure out a way to operate under the restrictions imposed due to COVID19.
Then they had to work out their level of appetite for lending during the pandemic (and with Brexit rumbling along in the background). Initially, mortgage lenders were, understandably, timid. To put this in context, there were some very significant barriers to lending. The most obvious of these was, arguably, the affordability criteria.
In 2020, the issue wasn’t so much the criteria themselves as the challenge of assessing them robustly. Lenders knew that they could face serious penalties if they were held to be negligent here. It’s therefore hardly surprising that they generally chose to err on the side of caution. There was also uncertainty over how the housing market would perform over the long term. Last but not least, the mortgage lenders had to be particularly cautious about fraud.
Time, however, is renowned for its healing qualities. Government intervention probably helped too. In addition to extending the Help to Buy Equity Loan scheme (albeit only for first-time buyers), it relaunched the Help-to-Buy Mortgage-Guarantee scheme. This created breathing space for lenders to say “yes” where they would otherwise have had to say “no”.
Over recent months, business has been booming for mortgage lenders. For example, in March 2021, gross mortgage borrowing stood at £35.6bn (according to the Bank of England). As a sign of confidence, this is encouraging. It does, however, raise questions about how long such momentum can be sustained and, of course, what happens when it slows.
House prices are going up (and down)
Figures may vary according to who’s measuring them and how. There is, however, no doubt that overall, house prices in the UK have been on a clear upward trend since July 2020. As a reminder, that was when the Chancellor introduced the Stamp Duty holiday.
As is often the case, however, overall trends are not necessarily reflected in local markets. Even when they are, they might not be reflected to the same extent”. Right now, the biggest demand is clearly for larger properties, the so-called “race for space”.
This means that the big winners are suburbs and satellite towns with at least passable commuter links. The biggest losers are city centres and established commuter towns. This trend looks very likely to become established as employers are increasingly showing themselves willing to support remote-/hybrid working.
Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage