Some good news in the housing market

Moving house is a miserable process at the best of times. I can only imagine how stressful attempting such a move during the current coronavirus pandemic would be. So while there are plenty of worse positions to be in, I do feel sorry for the 450,000 people who are apparently either in a property-buying chain or waiting to rent a new home. 

The good news for them this week is that the housing market is now reopening, in England at least (at the time of writing). As long as everyone sticks to social-distancing rules, then estate agents can open, surveyors can value properties and removal firms can shift furniture. So if you were in the middle of a transaction and the deal hasn’t already fallen apart amid the coronavirus chaos, you should hopefully be able to get into your new home at last. But what happens next?

Whether you like it or not (here at MoneyWeek, we don’t think it’s particularly healthy), the housing market is a critical pillar of the UK economy. A lot of our confidence, collective wealth and consumption appetite is tied up in bricks and mortar. So this question matters.

The other day, I asked readers of Money Morning, our free daily email newsletter (if you haven’t yet signed up for it, you can do so at moneyweek.com), to tell me about their views on the housing market. The answers weren’t too surprising – most of you agreed that the outlook boils down to two things: how bad unemployment gets and what happens to mortgage lending. 

On the first point, it’s hard to see how we get beyond Covid-19 without a sharp rise in unemployment. However, chancellor Rishi Sunak’s decision to extend the furlough scheme (under which temporarily laid-off staff continue to get 80% of their wages, up to £2,500 a month) until at least the end of October suggests the government will continue to underwrite incomes. And with the smarter banks seeing the current crisis as a chance at post-2008 redemption, they are likely to demonstrate as much forbearance to distressed borrowers as is practical. Those two factors should prevent repossessions from rising sharply in the near future. 

On the mortgage front, it’s hard to see interest rates spiking soon. But getting a loan might be more of an issue. With uncertainty over the outlook, banks will be warier than they have been of writing new business. Subdued lending combined with a lack of forced sellers suggest stagnation rather than crash. That said, if that is the outcome, I wouldn’t be at all surprised to see the government trying to “stimulate” sales. 

One thing I remain convinced of – the days of residential property being a reliable source of return for the small investor are long gone. Life for landlords won’t get any easier (indeed Covid-19 has made things much tougher for most). So where can you find a reliable income, particularly as the great dividend massacre continues in the UK? On page 20, Cris looks at where to find reliable investment income. 

A quick reminder before I go – next week is our 1,000th issue! We’d like you to help us celebrate by telling us: where would you invest £1,000 today, assuming you had to lock it up for the next ten years? We’ve already had some great ideas – get yours in by early next week and we might just squeeze you into our millennial issue. Just email us at editor@moneyweek.com, with the subject line “Issue 1,000”.

We look forward to hearing from you.