Not much has changed in a week, but given the announcement from the Prime Minister yesterday (10th May), it seems as though there may be some movement in the property market.

Changes in COVID advice

Construction workers are allowed to return to work – and I know that I will be picking up a few renovations for property this month. How this is to be kept safe for workers and tenants is yet to be seen but we have a mix of essential and non-essential work that needs to be completed.

Along with this, I would assume that it is going to be a matter of time before valuations can begin again and the number of blocked transactions / refinance transactions can resume.

The issue is lag in the property market – with any change to the economy or government policy, it takes time for these changes to come through. You can only get a view of what is happening from those closest to the beginning of a transaction – solicitors are a good indicator in this case. The market has been non-existent for new transactions – the impact of which will come through once this blockage is cleared. Despite being early in the lockdown – February had already seen a reduction in the HPI (house price index).

Wider Economy

The issue is that the economy is being artificially stabilised by the government on the assumption that demand will pick up from where it left off (as the BoE has suggested a -15% drop in GDP followed by an immediate increase of 15% in Q1 2021). I don’t believe this will be the case though – and it will take a much longer period to recover from this (varying regionally, 1-2 years in the south and 5-8 years in the north).

Footfall on the highstreet is at the lowest ever – this ‘unprecedented‘ drop is yet to come through to the results of companies – so it is all speculation as to how badly some firms are doing at the moment. That is until the Q2 results are calculated from June onward. This is when we will see the drop in the equity indices more akin to a recession. This is where banks and lenders will need to call upon liquidity reserves and this is where lending will be tightened or withdrawn completely.

Employment

Unemployment figures are not showing anything near the truth at the moment since businesses are propped up by the government who are paying the wages of most staff members.

Even when lockdown restrictions are removed, many case studies across the world suggest that business does not return to normal – whether that is because customers do not return, or businesses decide to stay closed.

This would mean extreme changes in unemployment as the real numbers emerge and companies aren’t able to support workers without government subsidies. The lowest level of unemployment was in 1983; and whilst we may not reach that level again – it is likely we will see a fall below 70% in the aftermath of the previous recession.

This period is the calm before the storm. The UK is creeping toward the precipice and nobody knows how deep the canyon is. It is going to be a rough ride – a bloodbath for many firms when releasing their half year results and a shopping spree for the rich as the wealth gap grows.

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