Published: 04/06/2020At the time of writing, the property market has just finished its first full week of being reopen. It's far too soon for us to say anything meaningful about the state of the market in Leeds. We're not really ones for wild speculation about what might or might not happen to the market, but we would like to share a few thoughts about the factors in play.
Many commentators are drawing comparisons between the 2009 credit crunch and our present situation. Back then, mortgage finance evaporated overnight, so hardly anyone could move apart from cash buyers. Currently there's no sign of any strain on the mortgage market. In fact, the opposite is true. With interest rates being so low, the purchasing power of buyers has increased even further.
It's worth taking a look back to where the property market was before the lockdown started at the end of March. For most parts of the country, house prices had been steadily climbing since about 2014. However, Brexit had created some wait-and-see sentiment in the market which meant transactions were fairly restrained. The expectation was that the usual spring surge in sales would be larger than usual in 2020 as the clouds of 'Brexit uncertainty' dissipated. However, February was the only full month we had between leaving the European Union and the lockdown. If the market were an aircraft, it would have been just about to lift off when the runway was abruptly closed.
By this logic, when the market reopened on the 13th May, one might have expected a sales boom, especially in the light of lower interest rates. That might still happen - it's too early to say, but there's a very good reason it might not. The main reason is uncertainty over unemployment. There is speculation that unemployment might start to rise once the lockdown is over. Some industries like travel, retail and pubs have been hit very directly but the impact on other industries may be somewhat delayed. Don't forget, huge parts of the national and global economies are inextricably intertwined through supply chains and ecosystems. Even if this doesn't play out like that at all, the uncertainty around it may put different brakes on the economy. Brexit uncertainty might be replaced directly by unemployment uncertainty.
It will take a while to see real movements in house price data. A fairly pessimistic forecast says prices might fall, albeit briefly, by around seven percent. For context, a fall of that order on the price of an average home in Leeds equates to about £21,200. We think this in unlikely, but remember it would work both ways, i.e. the price of the home you want would also be lower.
We've been involved in the property market for a very long time now and never has it been more important to work with a local market expert who can guide you through the next steps. We don't have a crystal ball, but we do know what logic looks like in this, or indeed any market environment. If you're a buyer or seller who wants to make the most out of your next move, please call us today.
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