The UK government is under severe pressure to help UK estate agents, many of whom have been forced to shut up shop in the ongoing housing market freeze. Amid some doomsday scenario predictions for the UK property sector, plummeting prices and a plummeting sales, there is real concern that the sector will be significantly smaller in size after Covid-19 is finally under control. So, what can the UK government realistically be expected to do?
Suspending property sales tax
Some experts are calling on the UK authorities to suspend stamp duty on UK property transactions in the short term. While this may act as a short-term boost for property investors, it would also significantly reduce the government’s tax take from property transactions. However, when you bear in mind there has been a huge increase in property tax income in recent times, maybe it is time to give a little back to the sector?
There is no doubt that property transaction numbers will fall significantly in the short term. Indeed, many experts are suggesting we could see the weakest level of property price transactions in more than 20 years. While we are dealing with many elements of uncertainty, some property investors are casting their eye back to the Brexit vote and the supposed impending “crash” only days after the referendum. As we know, this crash never arrived even though UK property prices did start to fall in the final weeks of Parliamentary paralysis and political infighting, prior to Boris Johnson retaking office with a huge majority.
The economy is the key
Those who have been following the Covid-19 support packages announced by the UK authorities may not be aware that current commitments are in excess of £350 billion. Indeed the commitment to pay 80% of ongoing employee costs where businesses are struggling is an open-ended commitment which could be phenomenal. When you consider these are commitments to assist employees during these difficult times, where will the UK government find money to help the economy when the UK is finally back and effectively “open for business”?
There is a huge correlation between economic performance and property prices in every single country around the world. Homeowners need a strong economy to pay their ongoing living expenses and mortgage payments. Once the economy starts to struggle, unemployment rises and more homeowners will struggle to meet their mortgage payments. So, while it is unlikely the UK economy will return from the Covid-19 nightmare in healthy shape, the authorities will need to very quickly inject confidence and capital into the system. Feed the beast!
Virtual property viewings
While many UK estate agents are already invested heavily in virtual viewings, it seems inevitable that we will see more of this going forward. Even though we are unlikely to experience anything like the phenomenon of Covid-19 in our lifetime again, never say never. There is also the fact that many buyers are now more Internet savvy and more than happy to undertake virtual viewings often involving properties out of their area. While estate agencies were marked by many as the last bastion of traditional business practices, it looks as though they will succumb to the Internet revolution once the UK is “back in business”.
The UK government is currently under great pressure to assist buyers, sellers and now estate agents. The key to all this is a healthy UK economy and perhaps more importantly confidence from both businesses and consumers. So far the UK government has been extremely active on the fiscal front and has done more than many had expected. Soon, all eyes will return to the UK economy and how quickly the country can get back on its feet. That, and that alone, is the key to UK property prices in the short to medium term.