According to the findings, each phase in the cycle will have an impact on household and consumer behaviour, spending priorities and the property market.
The first phase in the cycle, which will last a few months, is likely to revolve around a quarantined London with business opportunities focused around virtual viewings, remote liaison and people making reservations on properties, especially new build or unoccupied homes. During this phase luxury rentals are also going to be in strong demand particularly as most London hotels have closed down.
The second phase, lasting some months, will be when people have taken a virus-antibody test and, if some level of immunity is proven, are able to return to things such as office work. This phased return to work, which China is now starting, will help assist the economy and property market, even if bars, restaurants and clubs remain closed. The third phase is a lifting of quarantine measures and a gradual return to business activities.
It is forecast that this third phase in the cycle could happen between October 2020 and March 2021 with the London economy and property market anticipated to have a “mini-boom” similar to that which occurred post-Brexit when the capital had over £750 million worth of deals for properties priced above £5 million in just a few weeks as pent-up demand was released and buyers purchased properties they had coveted during the Brexit stagnation period.
The firm highlights that forecasting how events are likely to unfold in the London property market is difficult at present since each week brings fresh news regarding the Coronavirus pandemic and the UK and overseas government’s responses to events. However, a review of how the Chinese, Hong Kong and Singaporean property markets have performed over the last four months highlights some potential outcomes for London. It has led to Beauchamp Estates to devise the three-phase “traffic light” style evaluation of how the Coronavirus cycle will impact on London’s property market. More/
London is currently in the first phase of the Coronavirus cycle which is likely to go on for at least two to three months (April and May, and possibly, June 2020). This first phase is characterised by strict quarantine for all households across London, home working and all shops and leisure facilities apart from food supermarkets closed.
Beauchamp calculates that during this first phase in the cycle, the market for second-hand occupied London homes priced below £5 million is likely to see a 60% - 90% drop in volume of sales over the first six months of the year (Q1 and Q2 of 2020) with completions delayed until the quarantine lifts.
For London homes priced above £5 million, Beauchamp Estates believe that the drop in the volume of sales will be considerably lower since the level of transactions priced over £5 million and over £10 million is much lower and many properties are unoccupied and acquired by “cash buyers”. Any impact on prices is likely to be minimised as most buyers are just delaying their purchases rather than walking away.
The forecast is informed by the latest LONRES data for London residential property sales between the 1st January and 7th April 2020 and the data for the same time period in 2019. The LONRES data shows that overall London residential property sales are down 34% compared to 2019 whilst sales of houses are down 46% and deal fall throughs are up 85% on last year.
However, the proportion of London properties being sold at asking price is actually 59% up on 2019 (during the Brexit stagnation) which is why Beauchamp Estates have highlighted that values in the above £5 million marketplace have held firm, although prices have dropped for the below £5 million marketplace, especially for second hand, occupied properties, where deals have been stalled.
During the second phase in the cycle, as some Londoners return to office work, this should help to unlock the property market and the volume of sales should begin to stabilise. During the third phase in the cycle, taking place at either the end of 2020 or early 20201, the Prime London property market is likely to see a 20% rise in transactions and a wave of deals at all price levels as pent-up demand from the months of quarantine is released.
Beauchamp highlight that unoccupied properties, primarily luxury new homes, unoccupied dressed properties for sale and unoccupied lettings properties are the key instructions where business continues, focused around applicants being briefed remotely about properties via virtual viewings, videos calls, emails and telephone calls and people making reservations.
As the Coronavirus lockdowns have begun to lift in China, Hong Kong and Singapore applicants have begun to make enquiries about properties in London as they respond to a favourable exchange rate and a desire to take investment out of the turbulent stock markets and put it into fixed assets such as prime real estate.
The latest data shows that the Prime London lettings market has remained active. In the current marketplace tenants, priorities have changed, with address less important than space, with tenants wanting a large home where they can self isolate which provides an abundance of living space, bedrooms and large private garden.
As other income-generating opportunities such as the stock market have shrunk, landlords have focused more on their property portfolios, resulting in them being more flexible with in discussions with tenants over rental levels, deposits and terms.
Landlords are also seeking medium to long term lettings agreements with tenants since they know that the halting of tourism and international business travel will have a huge impact on London’s annual short term summer lettings market, with far fewer Middle East and Asian summer visitors likely to be in London this year.
The firm highlights that the most experienced estate agents and developers have switched their businesses to remote working, embraced virtual viewings and focused on online marketing and social media promotion. The ‘forced’ implementation of this new virtual tours technology will prove a ‘test case’ for both consumers and the property industry. If successful, virtual viewings and remote deals could become part of the new normal.
Early indicators show positive uptake by international investors and the firm has partnered with online technology firm Reevo 360 which enables buyers to remotely view a property and link up with a sales agent to take a guided virtual tour. Already a buyer in Asia has just had his offer accepted on a £20 million London townhouse, seen only via video.
Gary Hersham, Founding Director of Beauchamp Estates, says: “It is difficult to forecast how the London property market will perform during the Coronavirus pandemic but China and other Asian countries have started the second phase of the cycle which is why we feel the London market will go through a series of distinct phases. Our clients expect us to adapt which is why Beauchamp Estates has launched a special virtual viewings portfolio, stepped up marketing online, switched to remote working and is overall staying active.”
Jeremy Gee, Managing Director of Beauchamp Estates, adds: “The future is unknowable, however, we calculate that there will be three distinct phases to the Coronavirus cycle and how it impacts on the London property market. The current lockdown phase, characterised by virtual viewings and remote deals; a second phase where early investors will be active in the marketplace; and a third phase where normality starts to return triggering a Post-Brexit style “min-boom” where pent-up demand is released and we see a wave of property deals.”
