Three weeks after the housing market officially reopened, there is a sense that things are beginning to get back to normal – even the weather has reverted from bright sunny days back to much more classically British grey skies! Advisers are back to work helping borrowers who want to restart their housing plans and we are seeing intentions from lenders to return to higher LTV mortgages.

Yet the current situation remains overshadowed by the continued uncertainty about the extent to which crisis has damaged the housing market.

Earlier this week, the Nationwide House Price Index gave us some indication of what the future could hold, reporting a 1.7 per cent fall in house prices during May. That’s the biggest fall in 11 years, but certainly not the collapse predicted in some quarters. It seems likely that the impact of Covid-19 will be a much more complex picture than a blanket fall in property prices across the country. It may even encourage a rise in demand in certain areas or for homes that some buyers may have previously overlooked.

Shifts and fluctuations

The picture we expect to see is one of regional differences. House prices in areas focused around industries hard hit by the crisis – oil, travel and even manufacturing – are likely to see significant fluctuations. For instance, Aberdeen has always seen its property prices heavily influenced by the fortunes of the oil industry. Other areas where large redundancies have been announced, such as airports, could see a corresponding fall in demand that reduces house prices in these areas.

The lockdown’s impact may encourage a wider shift from buyers away from urban and inner city areas back to suburban and rural locations. Working from home has become normal for many people and some might even be anticipating that commuting to the office will be far less frequent in the post-Covid world. This could encourage a shift in demand away from cities or commuter belts to new locations as buyers are happy to have a longer commute that’s less frequent. Areas with easy access to open green spaces and parks could become more favoured and see a rise in demand and therefore prices – subject to having good broadband speeds of course.

The post-Covid market could also see the rise of property type as a factor that determines house price inflation as well. Two months of lockdown is certain to have increased the desirability of outdoor space and larger properties amongst buyers. Houses with easy access to public or shared outdoor spaces and houses with gardens are likely to become more attractive, while buyers might decide to look further away from their previously preferred locations to secure larger properties.

Industry reactions

Such changes in demand, desirability and affordability could also be influenced by how we in the mortgage industry react to the crisis. In recent weeks we have started to see lenders return to higher LTVs of 85 per cent and 90 per cent. These are positive moves which are to be welcomed, but we can’t stop there. A move back to 95 per cent mortgages will be vital for many buyers, particularly those looking to take their first step on the housing ladder. The long-term absence of these options could create a self-fulfilling prophecy on house prices where high LTV mortgages are a staple ingredient – for instance, a shortage of these loans for first-time buyers could lead to a lack of demand for properties that are attractive to this segment of the market, pushing prices down.

FTBs will certainly need these options, but advice will also be critical by signposting buyers to the alternatives such as family-assist mortgages and Help to Buy.

New drivers

Despite the Nationwide figures, the past three weeks has shown that there is clearly pent up demand in the housing market. Thousands of buyers are eager to get on and move ahead with their plans to buy. Last week saw some of the busiest days for mortgage searches since the lockdown was eased.

 Under the lockdown, we have all been really ‘living’ in our homes, spending more time in our flats and houses than perhaps ever before. This has given us an opportunity to realise what like and don’t like about where we live. We’ve also had the time to browse property websites.

This might encourage a new wave of transactions as people realise they don’t like their house, or perhaps their fellow inhabitants!  On the other hand, if we see a lockdown-fuelled baby boom in late 2020, it might encourage some homeowners to seek out a new property with an extra bedroom or two!

For some, there have been inadvertent financial benefits arising from lockdown. For those lucky folks who were able to keep working through the crisis, their net level of savings may actually have increased due to the lack of options of things to spend their income on (apart from loo rolls and flour of course!) and this could help them to save for a bigger deposit on their next house, or cover some of the costs associated with a transaction.

What is also evident is that the number of homes for sale remains fairly static and any pent-up demand that exists is currently not being met by increases in supply.

A rounded view

From my conversations with advisers, what is clear is that there is a positive activity going on in the market. Many advisers are handling new enquiries every day from people wanting to know how much they can borrow and there seems to be plenty of business currently in the nurture stage.

While it is yet to be seen how much of this business turns into mortgages written, offers and purchases, these are clearly green shoots for the mortgage market. Nervousness around house prices remains and may be holding back some buyers, but it’s important we take a balanced view and don’t get too focused on the sensational headlines we see in the news.

The view from my conversations across the mortgage market anticipate a neutral or very mild softening in house prices this year, but a strengthening in 2021. This picture certainly should not be putting off buyers from their potential dream home, especially if there are potentially many more buyers just around the corner. Of course, there is clearly the potential for new drivers to prices to emerge, the future is always uncertain but there are plenty of reasons to be positive.

Kevin Roberts, Director, Legal & General Mortgage Club