Planning on buying a property during coronavirus?

If you’re considering trading up to a place with more space, here’s what you should know about the current residential property climate.

The outbreak of COVID-19 has dramatically altered our everyday lives – and one of the more radical shifts we’ve seen, of course, has been the transition to working from home. At the request of the government and employers, staff have vacated their offices en masse for the relative safety of their own private living spaces.

But this ‘new normal’ poses practical difficulties, and you wouldn’t be alone if limited room at home has forced you, your loved ones or anyone you live with to share a common, probably congested workspace.

For better or worse, the kitchen table’s never been more in demand.

Equally, coronavirus, cloud services tools and a (largely) up-to-the-task broadband infrastructure have shown that most of us can carry out our roles just as effectively from home, without having to be physically present in an office.

It’s a realisation that could have significant implications for where we choose to live, and whether we’re inclined to move. Certainly, for some, it has already raised the prospect of relocating away from the hustle, bustle and expense of big city life.

Indeed, buyer enquiries to property website Rightmove, from people considering homes in villages, rose 125% in June and July – compared with a 68% increase in people searching for homes in towns.1

Every household will have its own reasons for wanting a change, confirms Melloney Underhill, Marketing Insights Manager at St. James’s Place.

“But whether you choose to move or not,” she says, “it’s important not to simply follow the herd. You should always take into account your own personal financial circumstances and goals.”

With no end to the pandemic in sight and the country now braced for a ‘second wave’, buying a new property that better meets the requirement and opportunities of the new normal might sound like an attractive option, she adds.

“But first you need to weigh up your own priorities and situation, in the context of the factors impacting the market. That’s where an adviser can help. As a minimum, they will provide a useful sounding board for you throughout the process.”

What is happening with the property market right now?

Property prices rose 2% in August from the previous month to an average of £224,123 – the highest monthly price bump for 16 years, according to Nationwide.2

The building society cited ‘behavioural shifts’ due to remote working as a contributing factor behind the increase. There are, however, more specific – if temporary – motivators behind the boom in property prices.

After lockdown restrictions were eased in May, for example, there was what analysts have called a ‘release of pent-up demand’ – and a consequent rush in house purchase enquiries.

Additional stimulus came in the form of a stamp duty holiday, which the government announced would run until 31 March 2021 in England and Northern Ireland. Under the terms of this ‘holiday’, home buyers don’t need to pay tax on the first £500,000 of their transaction.

A third catalyst to the uptick in activity might also be that people have managed to set aside extra savings – ¬as, for example, their plans for a summer holiday abroad were shelved. Now, sensibly, they’re looking to invest that cash in their future, rather than spend it.

Whatever the drivers behind the recent surge in interest, it’s a trend that’s unlikely to be sustainable, even in the medium-term, says Underhill. “There’s a paradox here. We’re witnessing an increase in activity against the backdrop of a considerable recession.

“The next 12 months could see the market pull back, as that pent-up demand works through,” she suggests. “The outlook will also depend on whether the stamp duty holiday is extended, the state of unemployment, given the government’s support measures – and if employees continue to work from home.”

Plan, save and protect

Meanwhile, prospective home-owners will require a substantial deposit in order to buy, stresses Paul Johnson, Client Banking and Mortgage Manager at St. James’s Place.

This is where any additional money that’s been set aside since social restrictions were implemented could prove very useful.

“Lenders are currently offering mortgages at a maximum of 85% loan-to-value (LTV). Some are coming onto the market offering 90%, but only for a few days – and there are big queues for these deals.”

According to Johnson, many lenders anticipate a downturn in the second quarter of next year. “But if you’ve got your heart set on buying right away,” he says, “you should try to save as big a deposit as possible – and plan your move carefully. Don’t make the jump unless you’re absolutely positive it’s the right time for you.”

He cautions: “Certain industries have been hit hard by the pandemic, and some people – including the self-employed – may find it trickier to arrange a mortgage than others.”

Here, Johnson reiterates the value of expert financial advice in helping to navigate the current uncertainty: “We know the market, and which lender may accept you ¬– and we’ll keep on top of any delays or changes.”

Right now, he points out, lenders have vastly different turnaround times when it comes to evaluating applications. “These could range from five to as many as 43 days, in some cases.”

If you do manage to secure a mortgage, Johnson says, “it’s vital to ensure you have adequate protection in place. This will provide peace of mind that your repayments will be covered in the event the worst happens and you’re made redundant, fall ill, or pass away.

“Again, protection is something your St. James’s Place Partner is well-positioned to advise on,” he finishes.

Is now the best time to buy? How could you secure the right mortgage for your circumstances? Your St. James’s Place Partner is on hand to guide you through the process. Just ask.

Your home may be repossessed if you do not keep up repayments on your mortgage.

1‘Village enquiries double as city dwellers escape to the country’, Rightmove, August 2020
2Nationwide House Price Index, August 2020