Kentish Express Ashford & District
Housing slump or a quick bounce back?
As debate continues over the impact of Covid-19 on Kent’s house sales and prices, business expert Richard Scase says forecasters fall into one of two camps...
Lockdown has brought house sales to a halt. But what happens when it comes to an end? On this, there are as many opinions as there are forecasters. Potential buyers and sellers are just as baffled. They will wait and see, and will neither buy nor sell.
At best this will make the housing market flat. Some estate agents are predicting a collapse in house sales of about 40% for the rest of 2020.
In Kent pundits are estimating a drop in house prices of about 11%. This fall could be much lower than in many other regions of the country.
House prices in the county will be determined by the health of the national economy. Economists who risk making any kind of prediction can, in general terms, be put into two camps. The pessimists and the optimists.
The arguments of the former are driven by the Bank of England’s statement last Thursday that the economy will crash by 14% this year, based on the lockdown being eased in June. This will be the sharpest contraction since 1706! According to the research centre, the Resolution Foundation, this will be equal to a fall of £9,000 for every household in the UK.
On this assumption, the housing market will stagnate over the next 12 months. As far as Kent is concerned the impact will be greater in the east of the county.
But even the commuter zone of west Kent will not be immune from price falls. During the Lockdown companies have come to realise staff working from home can be just as productive as if they are commuting into the office every day.
If staff are less likely to travel in and out of London on a daily basis, many may choose to relocate to regions where houses are cheaper, schools less crowded and the quality of life is much better. This will make living in crowded west Kent much less attractive.
In any case, these technocratic and professional commuters will be less exposed to the national economic downturn than those on very low earnings and working in insecure jobs.
A high percentage of mortgages in Kent are supported by two income households. If one of these jobs disappears there will be a problem of mortgage repayments.
The prospects are equally as worrying for tenants in the private rental market. Almost one-half of men and women living in rented housing are under the age of 35 and working in insecure, low-paid jobs in the retail and hospitality sectors.
Turning to the opinions of the‘optimists’, they have a totally different perspective.
They predict the economic downturn will be short-lived. Drawing also on Bank of England data, they predict the economy will rebound in 2021 and get back to its pre-virus level by the middle of next year. It will have no lasting damage to the economy.
In which case, there is a totally different scenario for the future of the housing market in Kent. There may be a stall in sales and prices until spring 2021, but then a return to pre-pandemic activity.
This could be reinforced by the unleashing of consumer spend. The more affluent haven’t been able to spend their money during the lockdown. High street shopping sprees and car trade-ins have had to be postponed. Holidays abroad, which for a family-of-four can cost thousands, have had to be cancelled. Weekly spending like taking kids out for treats, snacking in cafes during the day and eating out in restaurants has had to be abandoned. And it all adds up to considerable household savings during lockdown.
The consequences for the housing market and the
Kent economy based on this pent-up spending looks good. A boom in consumer purchasers should kick-start business activity and quickly lower unemployment. Just as importantly, it could save the livelihood of thousands of small businesses across Kent.
But the next six months will be the acid test to establish who is right - the ‘pessimists’ or the ‘optimists’?