Virtual viewings and desktop valuations: housing's lifeline? April 2020
06/05/2020
1
7 min read
According to HM Government we are over the worst of the initial wave of the lethal coronavirus. However there are unlikely to be significant moves to scale down the 'lockdown' in business and social life as the authorities understandably act cautiously to lessen the chances of a crippling second wave of pandemic infection.
Forecasts of when the UK housing market is likely to return to any sort of normalcy vary considerably with, for example, the Scottish authorities already announcing a further 3 weeks of lockdown. The most optimistic industry experts claim that the last quarter of 2020 might see a recovery however the majority of commentators are now looking at least to the New Year.
The question is, are there any lifelines to help the housing market struggle through in the meanwhile? These are particularly wished for given that at present, although many predict Prime Minister Johnson is set to announce a scale down in precautionary measures, these latter are still likely to last for at least another month.
Desktop valuations and remote viewings
Homes England has announced changes to its valuation requirements for Help to Buy. Essentially these now allow for desktop/remote valuations - such that the RICS surveyor/valuer involved does not have to visit a property in question physically. This is particularly positive given the dire situation that the first time buyer section of the market is currently faced with (more below).
We have updated our coronavirus advice article for home buyers and sellers to set out the details of this new regime. We continue to refresh all coronavirus-related information generally as soon as it is released to us from the key regulators and industry bodies: we advise you to bookmark this article if you haven't already and to return to it from time to time.
Many estate agents, encouraged by the National Association of Estate Agents, the industry body, have developed their remote viewing capabilities, which once again remove physical visits from the buying/selling process.
The NAEA has reported that most sales that were underway when the Coronavirus pandemic struck are 'holding together' and the estate agents' organisation said that this was largely because of 'agents putting in significant additional work to keep all parties informed and confident.'
ID5 video verifications rising
Alongside many moves more generally towards technology allowing remote rather than physical interaction, there has been an increase in the number of conveyancing-related ID verifications conducted remotely and occasioning completion of ID5 forms. Interested parties should read our article Land Registry ID5 form verification to be fully briefed on the topic.
In the same way that estate agents can harness virtual viewings to convert potential buyers and sellers, they can also offer remote ID checking as a welcome feature to assist conveyancing and one which is likely to find particular favour with prospects who are in demographics thought to be more vulnerable to the effects of the virus.
Use of remote ILA via Skype, etc. assists Mortgage Brokers
An increasing number of lenders, where a mortgage product requires independent legal advice (ILA) being given, are allowing remote ILA (click to find out more) as legally acceptable as part of the essential proof required to proceed with home loans.
Certain products such as joint mortgage sole proprietor mortgages and those which involve occupier waivers require a solicitor to provide independent legal advice and once again, the provision of this service remotely is likely to become increasingly common as a strategy to assist the social distancing that combating the coronavirus involves.
First time buyers hamstrung by lenders' loan to value changes
A particular challenge for the industry lies with the first time buyer market.
Anecdotally some sellers have already dropped their prices by 10% and mortgages are at historically low levels - five-year fixed-rate mortgage rates have fallen from around 2.95% at the start of the year to around 2.6% at this time according to various sources. Despite this, lenders will now not lend more than 80% in terms of loan to value on virtually all new residential mortgages.
Given that the vast majority of first time buyers are more likely to require a 90%:10% loan to value mortgage or even a 95% mortgage, particularly regarding Help to Buy, unfortunately it's highly unlikely at present that first time buyers can take any sort of place in the market.
It's entirely understandable that banks are taking this position: it would be foolhardy not to take a very cautious position on the state of the economy - and in particular the health of employment and self-employment - in the coming year or so.
Industry professionals are therefore at present focusing on the requirements of home movers and particularly cash buyers given that these make up virtually all of the numbers of the few prospective home buyers and sellers examining the market at present.
Please note that the time periods considered in the analysis which follows generally consider metrics which occurred just before the marked onset of the coronavirus in England and Wales.
[All statistics which follow are the most recently available figures from the Land Registry and the Bank of England unless otherwise stated.]
Decreases for average house prices and sales volumes England & Wales
Average house prices in England and Wales fell monthly for second month, by 0.5% in February to £241,705. Year-on-year there was a small – 0.9% - rise. Sales volumes for December – the latest month for which data was available – however fell both month-on-month (15.2%) and year-on-year (10.7%) to 64,799, the lowest monthly volume recorded since last April (63,433).
It's hard to read too much into the price data particularly given that prices peaked, to £244,923, only last September. The sales volumes however were more of a concern although the fall-off might be explained at least in part by jitters given the news gradually emerging from China.
London: average prices rise despite significant fall in sales volumes
The capital's average prices rose both monthly (0.2%) and yearly (2.3%), to £476,972. There was a decline in sales volumes for December – to 5,910 – however, both monthly (18.2%) and yearly (12.9%) and this was the least recorded sales since April 2016 (5,746).
This could well provide more evidence that if there is a recovery in the capital's housing market, at least as pointed to by the average price rise, this is something concentrated in luxury end of the market where there fewer sales have a greater overall effect on average price levels.
Real wages fall in February
It's fully understood that ongoing, both Inflation and real wages have been hugely hit by the effects of the coronavirus. For February however, for which the most recent figures are available and before the Government changed employment conditions, there was a small increase in inflation monthly (0.28%) while wage rates fell to £545 per week and taken in sum, this represents a fall in purchasing power.
For March, inflation was unchanged.
Mortgage and remortgage approvals up for February
Some element of the Boris bounce for the housing market could arguably be observed in the increases for approvals (both monthly and yearly) for both mortgages (3% and 12.7% respectively, to 73,674) and remortgages (3.7% and 9.2% respectively, to 53,061).
However for March, which is the most recent month for which the data is available, showed a clear reversal. Both monthly and yearly, mortgages (by 31.2% and 9.5%, to 56,161) and remortgages (by 24.7% and 14.3%, to 42,551) contracted, as the home loan market started to shut down.
Andrew Boast, co-founder of SAM Conveyancing, said:
"Our continuing best wishes to everyone as this awful Coronavirus pandemic continues. "
"It's impossible to know exactly when our housing market is likely to return to any sort of normality, although some activity continues, particularly in the cases of those who'd exchanged contracts before the lockdown started and particularly where a purchased property is vacant."
"A few crumbs of comfort can be gained from Homes England deciding to allow desktop valuations for Help to Buy and the numbers of estate agents who've developed their remote viewing capabilities."
"We remain open to look after our existing clients and are continually grateful to all those providing vital housing market information at the current time which we'll look to pass on as rapidly as possible to our readership. Let's all continue to work together to see out these challenging times."
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