The Bath property market after Covid-19
Predicting the future of the property market can be difficult even at the best of times. Predicting the future of the property market after a worldwide pandemic takes us into a whole new league.
Stories in the press about prices being reduced by 13% or more as a result of the economic impact caused by the Coronavirus lockdown reflect the expectation that lost jobs will lead to reduced demand for housing.
Putting this into perspective a drop of this size would take the average house price in the UK down to the level it was around 2016. Even at this level though a drop of 13% would not be a great as it was in the 2008 financial crash but it would still be a significant fall.
Whilst Bath has generally enjoyed very buoyant house price growth over the past few years and is regarded as being a wealthy property market, a number of factors will contribute towards a potential house price fall. The impact of Coronavirus on tourism means that Bath is likely to see a significant fall in the number of overseas visitors coming to the city, we may also see a decline in student numbers as rather perversely there is concern amongst academics that China will prevent its students from coming to the UK and studying in what they would consider to be a high risk corona virus area which may affect the potential rental values.
Set against this, over the past five years there has been something of an urban drift away from London which has benefitted the Bath market with more people seeing Bath as an alternative cosmopolitan market to living in London or the South East. This urban drift can only be assisted by the growth of home working as more people seek to avoid lengthy commutes and exposure to possible infection by travelling on public transport particularly into London.
As with all markets, the housing market is driven by the levels of demand and whilst there may be a contraction of the economy caused by the Coronavirus lockdown, the overall position will remain that demand continues to exceed supply and with interest rates having been reduced to a record low, the pressure on borrowers to repay interest on mortgages is at its lowest point and indeed the pressure on lenders to take possession proceedings will remain low unless the Chancellor takes the unlikely decision to raise interest rates. The Corona virus may reduce the attractiveness of the UK as a destination for migration but as a global pandemic the risks of infection for migrants moving to the UK would be no different to most other industrialized nations.
Overall therefore price falls seem to be an unlikely outcome of the Coronavirus lockdown. The rental market may see some reduced demand as the numbers of students fall and the number of people out of work due to the effect on the tourism and hospitality sector may reduce people’s ability to pay their rent. However, the fundamental strength of the market would still remain and if anything the employment market before the pandemic had created something of a barrier to economic growth with the shortage of labour being a problem for most employers.
Clearly, there is no right or wrong answer as far as the future of the property market is concerned. We are in unchartered territory and the impacts of this Coronavirus may well extend well beyond the initial impact and the new economic future will start to unfold once the lockdown is over.
For now, we will continue to do our very best for our clients, old and new. We are working remotely in line with the government guidance in respect of social distancing but we are still upholding the firms usual excellent standards of communication with our clients, estate agents, mortgage lenders and other professionals and are “business as usual” so far as possible. We must remember that we are all in this together, and together we will endure the unchartered territory we find ourselves in.