The United Kingdom Conditionally Throws Open Its Housing Market

The United Kingdom has announced that it will allow people to move houses if proper social distancing measures are followed. Robert Jenrick the housing minister in the government while making the announcement also said that he is binging a comprehensive, clear, and coherent plan to open up the country’s housing sector and also to restart the construction industry. This move by the government comes on the heels of the Office of National Statistics report published a day ago where it had stated that the housing market has shrunk by 5.9 per cent in March this year, which is the second weakest after the British Services Sector data. The United Kingdom has been under lockdown since 23^rd of March 2020 because of which the business activity level in the country has come to a standstill. The housing market since then has come to a standstill with no one coming out of their houses to view properties, and all estate agent offices are closed due to the lockdown restrictions. The period, however, has seen a significant rise in the online viewing of properties by prospective buyers, Rightmove, a company which advertises more than 90 per cent of all houses listed for sale in the United Kingdom, on behalf of real estate agents has stated that their website has witnessed 45 per cent more visits on the 13^th of this month compared to the previous day and there have also been 2115 new listings on its website since then. It is to be noted that on 11^th May the government had initiated the process of the gradual opening of the economy while strictly maintaining social distancing rules. The prime minister, while making the announcement, stated that those industries where social distancing rules are easier to implement would be the ones which will open in the beginning, followed by others.

The mood among the people since the outbreak of the pandemic in the United Kingdom can best be described as that of concern. Most people, while wanting to join work, are afraid to contact the virus and putting themselves and their families at risk. There has also been news recently that the number of property online viewings and enquiries for properties outside London has increased significantly. People who are able to render their services from home in a work from home setting with electronic equipment’s now find it worthwhile to move out of London. In addition to the city being highly risky due to its large population density, it is also very expensive. So people if they are able to earn the same, and have same productivity levels by working from home, can have a better option to move to a larger house away from the city, with less crowd and a better quality of life. The sudden spike in the number of listings as reported by Rightmove may be attributed to that. Regarding the construction of new houses, the government has a time-bound target to provide affordable housing to all its citizens. The Budget presented by the government this year had significant plans in this regard. Most of the housing construction companies have also been in bad shape since the imposition of the lockdown. Most of their construction projects have come to a grinding halt, and they have been counting losses in thousand if not millions on a daily basis. A longer lockdown will bring about structural defects in the sector and could very well lead to several construction companies going bankrupt, leaving their unfinished projects in limbo. On the issue of housing prices in the country, British mortgage lender Halifax had recently said that the house prices in the country have fallen by 0.6 per cent in April compared to the month of March, although on a year to year comparison it showed a rise of 2.7 per cent compared to where the prices were in April last year. However, despite reporting marginal fall in prices, Halifax cautioned that the price movement data could very well be distorted, as there was a very small sample size to measure on account of very few transactions that have taken place in the past one and half months, based on which its report has been prepared. The high distortion in the year on year price data reported by the mortgage company thus could very well be biased as it contains the data for January, February and up till the third week of March 2020. Halifax, however, expressed its confidence for the long-term health of the housing market in the United Kingdom, despite the current gloomy outlook it expresses its confidence that it will bounce back once the dust settles on the pandemic.

Incidentally, the other side of the real estate sector the commercial properties have not shown any kind of weakness on account of the pandemic. None of the reports that have come out in the past sometimes has shown that the demand for commercial real estate prices in London or other major Urban centres has fallen. By all means, the city of London seems to have been able to hold on to its importance as one of the world’s major financial and trading destinations. The phenomenon seems to be restricted to only housing side of the real estate sector, and particularly in the case of residential housing, the price fluctuation in prices of London properties is more volatile than the rest of the country.

The sudden increase in the number of listings and the massive increase in the number of visits on the website of Rightmove indicates that there is significant demand in the market. The demand may perhaps not be for new homes but for homes outside the city, for people who may be wanting to move out of the city. The market could very well see a significant amount of activity in the coming days if people do indeed make good on their transition plans. The pandemic has brought about a change in the way people perceive things and also what they think about what the future might entail for them. It is likely that a dynamic shift might take place in the housing market in the country post this pandemic.