Worcester, Droitwich & Malvern Market Update – May 2020
In a report published on 28th April, Zoopla estimated that there are 373,000 sales held up by the lockdown involving homes worth a total of £82bn.
One description, offered by Roger Martin-Fagg, a highly respected Behavioural Economist was that a substantial amount of consumer spending was on hold, rather like the water when there is a kink in the garden hosepipe. Once it is safe for the restrictions to be relaxed we can expect there to be a significant surge in spending.
Obviously, the impact of the global pandemic has been severe and has resulted in tragic loss for far too many families; this must never be ignored or forgotten nor the fact that the NHS staff and other key workers have emerged as heroes. Thankfully, however, for the vast majority of us, the swift and unprecedented economic intervention, by the government, has meant that jobs and income has been protected in such a way as to allow many to work from home and follow their instructions.
Once it is safe to do so, normal life will resume and that ‘kink in the pipe’ will be no more. All the plans that have been on hold will become the activity that helps us bounce back from the challenges faced over recent months.
If you want to discuss your plans I have a full team available to take your call and ready to help you prepare for what Captain Tom would call a better tomorrow.
LOCAL MARKET ROUNDUP
Over the last 12 months, there have been 4,832 sales across the WR postcode area, 11% less than the previous year. In Droitwich, 610 sales is 9% down, whilst in Malvern, where Nicol & Co plan to open their third office, activity was only 8% lower with 652 sales despite the recent months of uncertainty.
Droitwich and Malvern have similar average prices, close to £253,000; however, in Worcester, where 43.4% of the sales took place, the average sales price is 10% lower at £227,185.
The Lettings picture is similar with the average rent achieved in Worcester lowest at £597, with Malvern 15% higher at £687, 5.5% above the WR postcode area average of £651. Droitwich Spa remains highest at £774, 19.0% above the postcode area average. Over the last twelve months, based on the average no growth has been seen in Worcester, a small dip of -2% in Droitwich Spa and 4% growth in Malvern.
In the run up to the Covid-19 crisis, demand levels had been building in the market. 73,456 mortgages were approved in February, the highest monthly total since January 2014 at the peak of the housing market, even exceeding approvals in the run up to the 3% stamp duty surcharge.
There has been no mass exodus of properties from the market following the Coronavirus lockdown. Zoopla report stock levels per agent on 7th April were only 1% lower than 7th March. Rightmove report that available stock for sale is only down 2.6% since lockdown. This tallies with the recent Dataloft survey where 81% of agents reported the majority of vendors were keeping their properties on the market.
Interest rates were cut to just 0.1% in mid-March their lowest ever level, with some economists predicting Coronavirus will create a short, sharp v-shaped economic impact on the UK. Oxford Economics predict rates will remain at this level until the autumn of 2021. UK inflation was 1.7% in February, down from 1.8% in January and below the government’s 2% target.
According to HM Treasury latest consensus forecasts for GDP growth (made between 1st and 14th April) are -5.8% for 2020 and 5% for 2021. The current shutdown will have the biggest impact on the second quarter with the economy expected to shrink by -12.2%. However, with growth of 5% forecast for 2021 a strong recovery due to pent up demand can be expected.
There has been an exodus from cities to more rural locations, of students and young professionals returning to family homes. There is a real possibility some will choose to terminate leases on expiry and return months later, causing rental voids. Landlords should be pro-active in seeking to retain tenants through this period, well in advance of lease expiries. It also raises questions about the distribution of lease expiries in rental portfolios.
DO YOU HAVE RENT PROTECTION COVER?
With the increased threats from the extended Government lockdown and further legislation changes due to the COVID-19 virus, as a responsible agent, Nicol & Co felt it was absolutely necessary to protect our Landlord’s rental income, as much as is possible. Therefore, working alongside The Lettings Hub Ltd, an Appointed Representative of Let Insurance Services Ltd we were able to provide Rent Guarantee and Legal Protection cover to our Landlords.
There are now very limited numbers of Companies offering rent and legal guarantee insurance due to the Governments reforms on rental payment holidays, evictions and the Section 21 notice. Landlords need to be aware of what impact these reforms’ will have on their existing policies and what action they need to take to ensure the validity of the policy going forward. If you have any queries on this, or any other tenancy issue you may be experiencing, please call 01905 675999 and speak to one of the senior members of our team.