How is this new normal going to change the property market?

findigl has been developed to give buyers and sellers a technical view of the property market. We built findigl to give consumers an analytical view of the market.

We did some brainstorming to think through the recent history of the property market, the changes we are experiencing from the government response to covid-19, and how the sector will change going forwards.

Please note. This is not financial advice and doesn't necessarily reflect the opinions of findigl.

The UK property market pre-covid

The rental market - buy-to-let landlords

The one thing we saw happening trend wise, were the changes to rules on off-setting losses. Specifically, what was an investment making small profits in the short term to making profits and owning the property in the mid to long term was now potentially pricing many buy-to-let landlords out of the market.

In addition to the complexity around offsetting losses, we saw more complicated rules related to taxable income from rental yield. A key challenge with being a landlord are unforeseen costs from repairs and maintenance - these too have been increasing above the Retail Price Index.

The holiday letting market - Airbnb and friends

Private owners were beginning to realise they could make more money, not have the risks associated with increased regulation through tenant protection and instead make equivalent money by letting their property to shorter term holiday lets. This wasn't seen favourably by many, London set limits on the percentage of the year a property could be a holiday rental for.

The prices of properties

There had been a dip since the September 2015 high, but prices were steadily on the rise.

Relaxations on planning laws

The main change was to permit buildings to increase the number of floors without needing planning consent. We can see this as being a mechanism to give home owners the change to improve their property without having to move, to potentially add value and add extra capacity without needing to do new builds.

Slight moves towards home working (work from home) for office workers

Many companies have relaxed their attitudes towards some working from home. Under no circumstances was it a complete move away from office working, but working from home was a well known phenomenon for office workers.

High Multiple Occupancy (HMO) properties on the increase

The advent of commuter belts has created pressure on rental prices for many. Property owners realised they could gain better yields by adding more units to the building.

Affordable housing quota challenges

New developments for private dwellings requires some allocation of capital towards social housing in what constitutes a Public Private Partnership. Developers with sites of more than 10 houses has to contribute towards or build affordable housing.

Large Infrastructure Projects ongoing

HS2 and Crossrail, with all the wrangling over delivery schedules and costs showed commitment towards improving infrastructure. Similarly, upgrading to better communications networks and technology showed the UK was making some moves towards an uptick in its economy.

Brexit and its impact on the property market

On an individual and anecdotal level, many individuals chose to wait on buying a property as they felt Brexit would cause a house price fall. Sometimes, the perception of changes to a market are enough to shape behaviour. Here is one such article from homes and property.

The role of government in markets

Government influences markets far more than many realise and can affect individual behaviour;

• Stamp Duty can make a big difference in the price of property.
• Council tax bands affect ongoing costs.
• Cities were becoming more populated and that move towards smaller single dwellings was growing.
• Many faced with a choice of buying somewhere else to upsize chose to avoid stamp duty and extend their homes.

Summary on the housing market pre-covid

Some "macro" trends, such as quantitative easing were leading to very low costs of debt, and had not seemed to cause a sharp increase in prices. Tight lending practices continued to ensure the property market did not bubble over as expected. Certain factors, seemed to have caused some dips in certain markets but newer markets were emerging.

Covid-19 and the property market now

In what will seem contentious, significant strains were being experienced in the global economy before Covid-19 struck. The September 2019 Repo crisis was a huge liquidity shortage the Federal Reserve were trying to prevent. In our opinion, a battle which was being lost. There were signs of a slowing global economy. Further more - just as we have seen the many ways in which government policy has dramatically affected the property market, we see it having a more profound impact through the policy approaches to Covid-19.

Commercial Property

Those who are city based - London, for example, will know just how alive the commercial property sector normally is. Canary Wharf, The City Of London a bed of new commercial real estate. We are now left wondering whether these premises will ever be bustling offices?

Economic activity

Major sectors have fallen off a cliff. Often, mandated to close by new laws - restaurants, hairdressers, bars, hotels, cinemas has seen significant decline in activity. Furthermore, trends are showing people less likely to make regular shopping trips and shop online due to concerns over Covid.

Short-term holiday lets market

Visiting new places, when all the leisure amenities are closed due to Covid-19 has made the holiday lets - Airbnb type markets much less palatable. In some situations, just as those who were starting new restaurant businesses - some home owners were committing capital to this area.

Buy-to-let markets

Financial commentators are noting a few trends to be mindful of if you are in the BTL market.

• Capital supply will be reduced making lending harder.
• Huge unemployment in 2020.
• Significant increases in homelessness. This is likely to lead to extra protections enacted by government to help reduce the severe impacts of homelessness and poverty. Will this change the attitudes of the private landlords in the buy-to-let market market?

Further pressure on the Property Market Industry?

findigl as a platform, aims to add to the service provider's toolkit to give their customers a richer experience. Our research, and experience in working with estate agents shows just how competitive and challenging this sector is - but how rewarding it can be when done well. The obvious challenges to any business right now, is the mask mandate, the apprehension in many customers to visit properties. There is administrative burdens added to an already heavily regulated industry. All these scenarios are adding to the property market's cost base.

Working from home and Urban Flight?

Many large businesses are committing to remote working for the foreseeable future. This has been the push for many to reconsider where they want to be - but does this really signal the death of the city and city life? More rural and coastal areas are seeing higher levels of enquiries.

Some dramatic predictions on where the market may be heading

As we were rethinking findigl and researching the market, to ensure we are offering the right services to clients and customers, a fresh look at the market was essential. Some of these trends are happening in other markets and it won't be surprising to see the property sector to experience similar.

Significant proportions of commercial property in cities will become residential

This is our most boldest prediction. Remembering that property development does take many years to occur - this will not be overnight. As smart cities take hold, the idea of everybody going into offices will abate.

Urban populations will increase

There isn't the supply of rural property or the infrastructure to support a mass exodus from the city. Development will shift from commercial to residential, but many of these buildings will retain mixed use.

Smaller estate agencies are at threat from larger corporations but can adapt

Just as we have seen with how lockdown has affected the retail sector - Amazon doubled its profits during this period, larger businesses have better economies of scale to ride out the storm and adapt to changing legislation. Using the right technology in smaller, more agile companies gives them an edge.

Larger businesses are at increased threat from new technology

Virtual Reality - can it really promise virtual viewings with enough consistency to mean a buyer can make an offer without visiting a property? Maybe. We see innovation more in the conveyancing and contractual side of property through the use of data and blockchain based technology.

Increased demand for niche markets, off-grid and self-build

Whilst thismay not be a booming market in terms of market share, as energy technology becomes more efficient, we will see more demand for properties and sites suitable for off-grid living.

Tell us your thoughts

Feel free to drop us a line and let us know what your thoughts are.

References Homelessness in the US Covid after brexit and house prices Buy to let yield research Relaxation on planning laws Are city dwellers leaving in droves Enquiries for village life increasing Amazon doubles profits during lockdown

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