Paresh Raja

What does this second lockdown mean for the property market?

After weeks of speculation, the UK is once again in lockdown. Although it is due to run until Wednesday 2nd December , few people would rule out the current restrictions remaining in place for the rest of the year, if not longer.

p>So, what does the news mean for the UK property market? Firstly, we must assess how the sector has been responding over recent months. 

Between July , when the property market was allowed to reopen after the first lockdown, and October, there was a momentous surge in activity. The number of enquiries rose, and more transactions took place, resulting in impressive house price growth. According to Nationwide’s latest House Price Index, annual house price growth increased to 5.8% in the year to October 2020. 

This rate of house price growth can be attributed to two things: the backlog of transactions that had been put on hold during the first lockdown, and the introduction of the Stamp Duty Land Tax (SDLT) holiday by Chancellor Rishi Sunak on 8th July . 

In place until the end of March 2021, the SDLT holiday was designed to reignite the property market following almost four months of inactivity . It has evidently done just that. With buyers exempt from paying up to £15,000 of the tax , the initiative has simultaneously released pent-up demand from existing homebuyers and encouraged others to consider property purchases. 

Importantly, there has been no indication from Chancellor Sunak that the SDLT holiday will be paused during this second lockdown. This is reassuring news for lenders, brokers and agencies, as well as domestic and international buyers. 

However, should we worry that the progress made over recent months will be undone by the second lockdown? And will this new lockdown prove as challenging to the property sector as the first?

This will not be like the first lockdown 

While not meaning to downplay the challenges posed by the reintroduction of lockdown measures, this second iteration is not likely to have the same drastic impact on the property market as the first. 

For one, Housing Minister Robert Jenrick has confirmed that people will still be able to move home in November. On top of this, removal firms, estate agents and construction firms can still operate, so long as they abide to the necessary safe guidance. This means that property transactions will not come to a standstill, although the number of sales taking place will drop in the short-term. 

What’s more, banks, mortgage providers and specialist lenders should not retreat from the market as they did during the first lockdown. Having had time to brace for the news, and with the experience of the first lockdown under their belts, lenders will be better placed to remain open for business over the coming weeks. 

This means that property investors can still apply for mortgages and bridging loans. That said, they still do not have the same range of options available to them as at the start of year — and they must also accept that it will continue to take longer for mortgages to be approved, particularly if a borrower’s circumstances are complex. 

Indeed, mortgage delays have become a pertinent issue for property buyers. With banks struggling to operate as normal during the pandemic — and demand for loans rising amidst the SDLT holiday —there is a backlog of mortgages to be approved and issued, resulting in buyers waiting weeks or months to receive the finance they need to complete a transaction. It has threatened to undermine the effectiveness of the SDLT holiday, not to mention buyer confidence in high street lenders. 

Bridging remains an attractive option 

In light of the issues experienced in the mortgage sector, Covid-19 has served to demonstrate the advantages of specialist finance products. Established lenders like Market Financial Solutions (MFS) have been working closely with brokers and their clients to ensure transactions can take place quickly despite the challenges posed by the pandemic. That is precisely why MFS recently launched a £60m Covid-19 recovery fund

Throughout November, I believe we are likely to see an increase in enquiries for bridging loans from borrowers who fear that delays and complications with other lenders could result in a sale falling through. For those with small deposits or complicated incomes (such as the self-employed or those who derive incomes from multiple investments), the number of mortgages available will be limited, while providers are also likely to charge higher rates and take longer to process applications. 

That is why brokers need to ensure they are aware of all the loan products currently available beyond the high street banks. Just as has been the case over recent months, expect more brokers and buyers to consider specialist finance products. 

For now, there remains cause for optimism when it comes to the property market. Yes, the second lockdown will naturally affect the number of transactions taking place. Nonetheless, with the SDLT holiday still available and alternative lenders ready and willing to deploy finance, I have every confidence the property sector will overcome the challenges posed by this second lockdown. 

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