COVID-19’s cost to the housing market
According to this article in Property Investor News analysis conducted by Knight Frank, COVID-19 and the subsequent government lockdown will result in a loss of 526,000 home sales in 2020.
This fall in transaction volumes represents a reduction of 38% on 2019 and poses significant economic implications, according to new research released by the firm.
Zah Azem, Partner Scrivener Tibbatts said: “Knight Frank has forecasted that the knock-on impact of the housing market shut down will also result in 350,000 fewer mortgage approvals in England and Wales this year. Multiplied across the economy the fall in activity represents a loss of £7.9bn in DIY and renovation spending and £395m for removals companies, according to their analysis. Here in Wimbledon however I’m pleased to report it’s virtually business as usual for us.”
Knight Frank predicts a wider economic impact, including the loss of employment and general mobility. This drop in economic activity will have a huge impact on The Exchequer with the loss of £4.4bn in stamp duty accompanied by a decline of at least £1.6bn in VAT and significant declines in personal and business tax revenue, the firm says.
“Moving house has a clear multiplier effect for the economy,” said Tom Bill, head of London residential research at Knight Frank. “Different-sized businesses in all areas of the economy feel these benefits, which is something the government will take into account when drawing up its post-lockdown stimulus plan.”
Simon Gammon, managing partner, Knight Frank Finance explains that, as a result of the lockdown, 150,000 fewer mortgages to first time buyers, underlining how crucial it is for the whole economy that property industry professionals are able to get back to work as soon as it’s safe to do so.
“It’s become increasingly clear lenders are eager to do business,” he said. “Two weeks ago many banks retreated to the safety of more conservative lending criteria as they were overwhelmed by calls in the wake of two Bank of England rate cuts and the shut-down of many international call centres. But in recent days we’ve seen the major lenders coming back, raising the loan-to-value ratios they are willing to lend at, eager to gain market share. All they need to get the borrowers moving is a functioning housing market.”
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