The Housing Market and Valuation Restrictions
The restrictions on personal and commercial activity have been increasing steadily over the last two weeks. On 26th March 2020 the Government issued specific guidance on activity in the housing market.
In the days leading up to the announcement, many residential valuers had already ceased taking instructions, estate agents had closed offices to work from home and, in most cases, viewing of property on the market had stopped. There has also been a slow reduction in the number of lenders prepared to continue to offer finance.
The guidance issued on 26th March effectively puts the residential market into hibernation. The government’s instructions are now that no new sales should be agreed and that only sales which are already in progress should go ahead and, if possible, they should be delayed in order to reduce the number of people moving.
The guidance which includes specific information for estate agents, conveyancers and surveyors can be found on the government website here:
https://www.gov.uk/guidance/government-advice-on-home-moving-during-the-coronavirus-covid-19-outbreak
The guidance for surveys is that there is not an absolute ban on inspections, but they should only be undertaken when the requirement is urgent and the physical distancing rules can be followed. As many legacy asset sales are of vacant property, some inspections may be possible. However, it is likely that the number of valuers available to undertake inspections will be much reduced.
Where sales are ongoing and a Qualified Surveyor’s Report is required it may be possible to undertake a desktop or drive-by/external appraisal. Whilst this will not meet the full requirements of a QSR report, it would provide a “second pair of eyes” and an audit of the sale process.
At the time of writing on 27th March 2020, the effect on the property market in respect of values is not clear. We have had a number of properties on the market with agents and through public auctions in the last two weeks. There have been mixed results and no clear conclusions could be drawn on values but then there were already fewer active buyers.
Our advice for the last few days has been to consider whether a property needs to come to the market at this point given the uncertainty and already known difficulties in obtaining loan finance. The government directive is helpful in that the entire market has been told to cease operation. Whilst background investigations and paperwork might be put in place full marketing is on hold. No doubt some negotiations on properties that have already been viewed will continue and some sales will be achieved to purchasers who already have or are not reliant on loan finance. However, the entire process is likely to be delayed by lack of personnel. I am hearing from my planning colleagues that local authorities are shutting some functions down and this may mean that local searches are either delayed or cannot be obtained at all.
Prior to the restrictions being imposed, the market was showing signs of a resurgence in activity. The underlying demand is unlikely to completely go away but a disruption to household cashflow may mean that sales and purchases are deferred and that it will be a few months before the market re-establishes itself once restrictions are lifted. The effect on values cannot be predicted at this point but I expect that the longer the restrictions are in place the more likely it is that there will be at least a short-term reduction in achievable prices.
To discuss, please contact Andrew Tompson MRICS on 01327 356147 or email andrew.tompson@berrys.uk.com.
