Why lockdown 2.0 will not affect burgeoning demand for property


Paresh Raja Market Financial Solutions

To combat the second rise in COVID-19 cases, the UK is once again under lockdown. This is now the second time stringent social distancing measures have been introduced, with businesses being encouraged to work from home where possible.

At the moment, “lockdown 2.0” is scheduled to end on Wednesday 2nd December. While there are concerns this date could be pushed back, much will depend on whether the rate of new cases drops.

Importantly, the rules and regulations are by no means as strict as the first lockdown. The reason for this is simple – the government recognises that once COVID-19 is effectively contained, the long-term challenge will be kicking the economy back into gear.

The announcement of financial relief and support packages to encourage consumer spending and investment activity have been extremely well-received. And even with the country in lockdown, the government does not want different sectors to come to a complete standstill.

This is particularly true when it comes to the property market.

Unlike the previous lockdown, people are still able to move homes and estate agencies can remain open so long as social distancing guidelines are adhered to.

On top of this, the Stamp Duty Land Tax (SDLT) holiday will remain in place, providing the financial incentives for first-time buyers through to landlords and sophisticated investors to complete on property transactions.

There is no denying the recent standout performance of the property market. Since the announcement of the SDLT holiday, buyers have been flocking to take advantage of the savings on offer. This is leading to house price growth not witnessed since before the EU referendum.

Halifax’s latest house price index revealed that house prices in October were 7.5% higher than in the same month a year earlier – the strongest growth recorded since June 2016. This spike has been attributed to the rise in demand for property as a consequence of the SDLT holiday.

A market alive with activity

In my opinion, while we might see a slight drop in activity, I do not believe this current lockdown will drastically impact buyer demand for property in England and Northern Ireland.

If anything, lenders could be faced with the opposite problem – an increase in enquiries from buyers which could lead to application delays.

I recently wrote about the need to extend the SDLT holiday beyond the 31 March 2021 deadline. The reason for this was not only due to the success of the policy but also the fact that many mainstream lenders are simply not equipped to deal with the influx in enquiries.

As a consequence, there is a risk mortgages will not be deployed on time and that sales will have be completed once the deadline passes.

Having effectively overcome the initial obstacles posed from remote working, Market Financial Solutions (MFS) is ready to receive applications and deploy tailored bridging loans at the same high standard.

We have consulted our credit lines and launched a £60 million COVID-19 recovery fund for this very purpose, meaning that our loans can be issued within days.

Established specialist finance lenders have effectively adapted to the so-called “new normal”, embracing digital technologies and putting in place new processes which enhance their products and services.

Having overcome the challenges presented by the first lockdown, lenders like MFS are now expertly placed to deliver loans quickly no matter how complex a case might be.

In this respect, I do not think this current lockdown will be undermine market demand for real estate. On the contrary, the real issue is ensuring lenders can process applications and deploy loans during this period.

Mainstream lenders and mortgage providers might struggle, which is why brokers and buyers need to look beyond the high street and recognise the advantages of specialist finance products, like bridging loans.