RICS: Government intervention needed to bring back housing market post-virus
Whilst Scottish surveyors were upbeat about the outlook for the housing market before last month, it is now clear that the current lockdown situation will have a significant impact for the rest of the year, according to the March 2020 Residential Market Survey from the Royal Institution of Chartered Surveyors (RICS).
In March, a net balance of -81% of Scottish respondents reported a fall in buyer demand, and unsurprisingly, newly agreed sales were seen to have dropped, with 56% more respondents in Scotland reporting a fall.
New homes coming onto the market in Scotland also reduced sharply over the past month, with a net balance of -75% of respondents reporting a downturn.
Looking ahead, sales and price expectations for the next three months have turned deeply negative following the lockdown measures. The net balance for three-month price expectations is now -87% (down from +23% in the previous survey) and the net balance for three-month sales expectations is -100% (down from +25%).
Looking forward to the next 12 months, respondents were slightly less negative, although 52% expected sales to fall further rather than rise.
Despite the very challenging pictured in the second half of Mach, prices were reported to have risen over the past three months, with a net balance of +34% of Scottish surveyors saying prices increased in the January to March period. And although the near-term and 12-month picture for prices is challenging, price data for the next five years remains resilient.
Moving to the lettings market, March has seen new landlord instructions fall with -40% more Scottish respondents reporting a decline. Tenant demand in Scotland also fell (a net balance of -18%) as the virus had a significant impact on near-term rent expectations which slipped into negative territory for only the second time in 32 months.
Kieran Bonner, MRICS, of J&E Shepherd in Stirling, said: “It was actually a very positive March until the COVID-19 crisis hit. A period of lockdown and uncertainty lies ahead.”
Commenting on the UK picture, Simon Rubinsohn, RICS chief economist, added: “The results of the latest RICS survey capture the period during which the economy moved into lockdown so show a somewhat mixed picture.
“But critically, the key forward-looking indicators clearly reflect the emergency measures in place. The fact that responses are negative not just at the three but also the twelve-month time horizon is significant in suggesting that the legacy of COVID-19 could be such that any return to what might be described as ‘normality’ in the economy will take time and households will remain cautious for a while.
“Of course, the primary focus of government is at this stage the health of the nation and defeating coronavirus and it may be a little premature to be planning for the economic recovery.
“However, the feedback from the survey does imply that further government interventions both in the wider economy and more specifically in the housing market may be necessary to aid this process supporting businesses and people back into work.”
Hew Edgar, RICS head of government relations, added: “While the UK’s health is the priority, our survey feedback suggests that the government will need to start considering medium and long-term measures that could assist a post-pandemic housing market.
“These are exceptional circumstances and the government will need to consider all avenues that could feasibly rebuild confidence, bridging the gap between uncertainty and recovery.
“RICS is not an organisation that would call for a stamp duty holiday on a whim, and indeed our view prior to COVID-19 was that it required a full-scale review. As we start to emerge from this crisis, however, it is likely that the finances of potential homebuyers will be under strain, and the burden of stamp duty could put buyers off.
“For those who can afford to move they may lack confidence in the market, adding to the slow down. A stamp duty holiday could be one of the ways to reactivate the housing market quickly as a short term measure.”
- Read all of our articles relating to COVID-19 here.