On 31 October, Boris Johnson announced that the UK would be going into a second lockdown for one month from 5 November 2020. One question to consider from a real estate perspective (as of course there are far more important considerations) is what effect this lock down will have on house prices.
Following the first lockdown, it was widely believed that house prices would tumble. Indeed the Bank of England predicted that they could fall as much as 16% in a year. They and most others were completely wrong as indeed prices shot up almost as soon as the market reopened. This was mainly due to repressed demand and desire for outside space.
Will there be differences this time?
- Different Season
When we came out of the first lockdown, we were in the midst of an extra sunny summer. Gardens and country living appeal more than ever, especially to those who had been cooped up in flats without outside space for many months.
This time round, if the lockdown does end on 2 December, this will be in the middle of winter. This traditionally is the slowest month for property sales anyway. Added to this, on bleak rainy days in December maybe the appeal of the necessity of a garden will be far less.
Therefore the fact that we will come out of the lockdown at a different time of the year may mean demand will not spike this time around.
- Length of lockdown
As above, suppressed demand accounted for the spike following the first lockdown. This was because many buyers and sellers were kept out of the market for many months.
On this occasion though, if not extended, the lockdown will only last 4 weeks. Therefore the shorter length of time will mean there will be less buyers and sellers kept out of the market.
- Concerns about further lockdowns
At the end of the first lockdown, it was felt Covid-19 was coming to an end. The trajectory was downwards so there would be limited effect on the long term investments like homes, if it was coming to an end.
Then we had the second wave. This means there could be more waves and lockdowns to come, nobody knows. Therefore the belief that the worst was over has been replaced with uncertainty of the future. Uncertainty is never good for house prices.
- The end of Furlough
When the economy reopened after the first lockdown, various schemes were in place to protect the economy and people’s incomes. One of these was the furlough scheme. This scheme, although extended to a less generous version, is coming to an end. It is also widely expected that there will be a large amount of job losses. Whether this transpires into economic doom is anyone’s guess, but the point that there is a fear that it could happen will affect house prices.
Therefore there are many factors as to why the ending of this second lockdown may not lead to a spike in property prices as we saw after the first. Indeed it could even lead to a fall. One is certain though is that property prices do not always follow what experts think.