"It’s going to be incredibly tricky to gauge value primarily because they will have little up-to-date data to go on given that transactions have been slim during the lockdown period."
There is a lot of talk around the market at present with regards to the post-Covid-19 environment being a ‘new normality‘ for all of us to deal with. My view tends to be it’s not so much a ‘new‘ as ‘evolving‘ normality and as this situation shifts and fluctuates, we as mortgage practitioners have to adapt with it.
Understandably, and certainly since the re-introduction of physical valuations in England at least, there is a lot of interest in property pricing and how surveyors are going to approach their instructions in the short- to medium-term.
The assumption appears to be that house prices will see a significant fall – the Bank of England itself suggested this might be in the region of a 16% drop – albeit we need to recognise the very real regional differences that will impact on where prices eventually land.
I’ve often compared the UK market to an Aero chocolate bar in that there are lots of bubbles within it, and there appears to be little doubt that, post-lockdown, a number of these might well go pop.
Valuations will have the biggest impact on prices, and in that sense, surveyors currently have a very difficult job. It’s going to be incredibly tricky to gauge value primarily because they will have little up-to-date data to go on given that transactions have been slim during the lockdown period.
You’ll also understand why they might err firmly on the side of caution when it comes to making those valuations, and in a sense, advisers might want to warn their clients that the value they put on their own property might now might be very different to what the valuer comes back with.
There’s been some talk about surveyors applying a Covid-19 ‘haircut‘ to values, especially if they have good memories about the post-Credit Crunch market when many lenders came back to surveyors due to valuations which didn’t appear to stack up. In that sense, a property which ordinarily might be valued in the region of £300k, might ultimately only make £270k in the valuation in order that they don’t have to confront lenders on the same issues as they did back then.
From our perspective, we as a lender are happy to lend up to our maximum LTV providing that the valuation fits, and again because of this, we are likely to see a cautious approach which will undoubtedly work its way through to prices.
Which if you’re a professional or semi-professional landlord – or you’re an adviser working with these clients – may well play into your hands. Remortgaging is likely to remain the bulk of all buy-to-let business, but there are already signs that landlords are not shying away from being acquisitive in this market.
Again, those who went through the Credit Crunch, will probably remember an increase in demand for private rental sector housing post-crisis which also translated into rents increasing over time.
Combined with an ability to purchase at a lower level then the opportunity for greater yield over the longer-term is already there – recent history has shown that landlords are willing to go looking for yield in more complex areas of the market like HMOs/multi-unit blocks, but in a post-virus environment they may not have to look so hard.
Overall, therefore, while this situation has been to no-one’s liking – certainly not ours as a lender – there are still likely to be opportunities for advisers and landlord clients alike. The landing we get for the housing market will remain unknown for some months, but it’s likely that pent-up demand is already being released and advisers need to make sure they are ready to help those clients when they are ready to move things forward.
It’s what we’re doing as a lender with our adviser partners – being here for you when you need us – and I’m sure that a similar approach and increased adaptability will ensure you‘re able to get the most out of the situation both now and in the future.