How Will the Lockdown Tier System Impact the Property Market?
Now that we have the details of the tiered restrictions being put in place across England and the 'circuit-breaker' lockdown in Wales in response to the second wave of COVID-19 infections, we have a better understanding of how the new rules will affect the functionality of the property market. Business Development Director, Jeni Browne, explains.
**This article has been updated with new advice**
In many ways, as Wales and parts of England enter lockdown restrictions almost identical to those we all experienced in April, it all seems a bit "Ground Hog Day". And while it's a worrying and uncertain time for us all, it does appear that the effects on the property market will not be quite as disruptive as back in the spring.
At the moment, the general guidance from the Government is that "you can still move home if you're in a very high alert level area", and that estate and lettings agents can continue as usual, with the appropriate social distancing and hygiene measures in place. One of the primary roadblocks the mortgage market encountered in the spring was the fact that physical valuations were unable to happen, meaning that lenders could not fully underwrite mortgage offers and complete deals.
So, if you're in the process of, or are considering purchasing or remortgaging a property, how might you be impacted?
England
Below are the guidelines for each of the three tiers for England:
Tier One – Medium Alert
At this level, the vast majority of businesses can operate in a COVID-secure manner, and groups of up to six can meet either indoors or outdoors. House viewings with two prospective buyers, wearing face coverings and maintaining distance are permitted. Valuers will also be able to complete inspections while respecting the same hygiene requirements.
The impact of Tier One should be minimal, as this is how most of the UK has been operating since July. Of course, if anyone in the household or viewing the property shows symptoms or needs to self-isolate, the appointment should be delayed.
Tier Two – High Alert
In addition to Tier One restrictions, Tier Two areas are not permitted to meet anyone from a different household indoors. Under the Government guidelines, property viewings are still allowed, so the impact at this level will be far less than the previous lockdown. However, inhabitants of the property may request that due to the no household mixing indoors rule, physical viewings, surveys and inspections are postponed or conducted virtually. Virtual valuations are not appropriate for every property type, so this could cause some delays to mortgage applications for large value properties, flats, HMOs and Multi-Unit Freehold Blocks.
Tier Three – Very High Alert
This tier is the most like the spring lockdown restrictions. In Tier Three, you are not allowed to meet with anyone not in your household, either indoors or outdoors, except in public spaces such as parks. You are advised not to travel except for work (which cannot be done at home), education and caring responsibilities.
Although the guidelines technically still allow for house viewings and moving, some estate and lettings agents and valuers may decide against operating in Tier Three areas. That said, we have already heard from one of the largest valuer companies, who have assured us that they will continue physical inspections in Tier Three, where it is safe to do so. However, ultimately the properties inhabitants are the ones who decide whether or not they'll allow viewings and inspections.
Scotland
In Scotland, while physical viewings are permitted, the advice is that these should be completed virtually where possible. To minimise unnecessary physical viewings, they suggest that you have a virtual viewing first. Of course, in terms of property valuations, this will not always be possible, so physical valuations should only take place where necessary.
Wales
With Wales entering a 'firebreak' lockdown from 6 pm Friday 23 October until the start of Monday 9 November, the property market will be facing a similar situation as the summer. Welsh residents are prevented from mixing households (apart from established 'bubbles') both indoors and outdoors and should remain within their house, apart from leaving for essential reasons.
Viewings have been banned for the period, as have visiting valuers and surveyors.
**Updated information: since the original publication of this blog, we’ve been informed by one of the largest surveying companies that the guidelines no longer prohibit surveyors entering properties. As long as inspections are managed safely, and no one involved has symptoms, property valuations can continue in Wales. They do recommend, however, that where possible valuations are deferred until after the 9th November. Ultimately, this still remains at the discretion of the properties’ occupants.
However, there is one fundamental change, despite the travelling restrictions in Wales, limiting travel to necessary travel only. If you are due to move house and are unable to postpone the move date, you are permitted to move.
As the Welsh property market is going to experience similar, albeit temporary, delays to those that we saw in the spring, we expect mortgage valuations to get queued up for the release of the restrictions. So as before, if you are planning on applying for a mortgage or remortgage get your application in now to be at the front of the queue!
While this might seem like a gloomy outlook for the UK property market, we are generally in a much better position than back in March. The majority of lenders can complete desktop valuations on qualifying property and, currently, there are few restrictions preventing property visitations for sales purposes (Wales being the exception).
We've already seen how lockdown affected buyer and tenant priorities in terms of gardens, access to local parks and extra living space. Another form of lockdown may renew people's desires to move again, and people will also still want to take advantage of the stamp duty holiday. So, whether you're trying to attract new tenants or sell a property, demand should remain high.
What I will press, is that if you are purchasing a new property and need a mortgage or are remortgaging a more specialist property, get your applications in now. By ensuring you are first in the queue for valuations, you will be less impacted should there be further delays or a suspension of valuation services. Additionally, if you require mortgage finance quickly, we keep up to date records of lender service levels; meaning we can advise which lender will be the most suitable for your circumstances.
Whatever your current property investment requirements, you can give us a call on 0345 345 6788 or email enquiry@mortgagesforbusiness.co.uk, and our team of experts will be able to offer advice and help take the stress out of the process.
21st October 2020
