The global economy is already showing the first symptoms of a new affliction, with the biggest plunge in share prices since the 2008 financial crisis and China’s economy threatening to contract for the first time in decades.
So far, housebuilders have only been mildly affected, with minor dips in their share prices. This morning, Berkeley and Vistry’s shares had flatlined, Redrow was down over 1%, Crest Nicholson had slipped 0.57%, Barratt’s shares had been nudged down by 0.03%. Taylor Wimpey’s shares inched up 0.24%. These housebuilding heavyweights have been trading lower since mid-February.
However, many gloomy observers have professed that the worst is to come. The economy could be put into an induced coma, with businesses and parliaments paused until the threat of the disease is passed. Countries such as Italy and Japan have already dismissed their schools for a month.
In the worst-case scenario, coronavirus could forcibly shut down building sites under emergency measures to contain the virus, silencing construction for up to three months.
“While construction order books have begun to recover in the opening part of 2020, the fly in the ointment is the uncertain impact of the coronavirus outbreak on UK economic growth prospects,” said Tim Moore, Economics Director at IHS Markit. “A renewed slowdown could see domestic investment spending put back on hold and dampen the outlook for the UK construction sector.”
However, coronavirus hasn’t affected appetite for property. The latest research from lettings and sales agent Benham and Reeves shows that 83% of home buyers and sellers will not be put off buying a new home this year because of the Coronavirus.
Just 9% of people stated that they were in the process of buying and selling but have now called it off and decided to wait, with just a further 9% of people originally planning to buy or sell this year but also now deciding to put it on hold.
Regionally, it’s those in Scotland that are the most defiant with 90% keeping calm and carrying on with their property transaction, while those in the North West were most conscious of the outbreak with just 77% stating it wouldn’t stop them transacting.
Perhaps surprisingly, those most at risk in the 65 and over category were the least deterred, with a huge 96% transacting on their property purchase or sale come hell or high water, while those aged 18-24 were the most conscious with 30% calling off a current sale or purchase and a further 27% deciding against it this year.
Despite the number of UK cases starting to climb, 69% of people also stated that even if COVID-19 became a more serious threat due to it starting to spread they still wouldn’t let it stop them buying or selling a house.
Looking back at historical outbreaks it would seem as though this defiant attitude is nothing new. During the flu pandemic between March 2009 and August 2010, UK house prices increased by 12.3%, 17.5% across the capital.
While the threat of the Ebola virus remained away from domestic shores, there was also no decline in UK house prices due to wider economic and investor related turmoil, with prices increasing 14.4% across the UK and 26.6% in London.
Director of Benham and Reeves, Marc von Grundherr, said: “We’ve just endured a very prolonged period of market uncertainty that caused many home buyers and sellers to adopt a ‘sit tight and see’ mentality. However, since the end of last year, they have returned in abundance and the market has well and truly sprung back to life.
“It would seem that having sat on the sideline for such a long time, and while the threat of the Corona Virus remains at arm’s length for many, the mere suggestion that a global pandemic would now stop them from buying or selling is completely out of the question.
Growth during previous pandemics suggests that house prices will also remain unaffected and while we may see a stutter in foreign investment from areas to have been worst hit, domestically we will soldier on and won’t let it dent our aspirations of homeownership.”
While buyers are still champing at the bit to move into a new home, if businesses are put into quarantine, they may be forced to put their plans on hold. However, the pent up demand will ensure a speedy recovery for the property market.