Estate Agents: Inc Impact of COVID-19 - UK - November 2020
Overview
 
The result of the 2016 EU referendum led to a period of economic and political uncertainty that has contributed to a slowdown in economic growth. These factors have contributed to stagnant business investment and consequently affected growth in the number of property transactions for both residential and commercial properties.

Although uncertainty was lifted by a decisive General Election in 2019, this boost to businesses’ confidence was completely reversed by the COVID-19 pandemic. MBD estimates the estate agents market will decline by 7.5% in 2020 to reach £10.6 billion. The decline was primarily driven by the temporary collapse in activity during the initial lockdown phase of the pandemic during Q2 2020.

Despite the shock caused by the pandemic, the property market has fared well in comparison to previous recessions. House prices have remained stable, indicating that government support measures including income support, mortgage and rent holidays and business financing have been successful in mitigating the pandemic’s economic effects.

Alongside quickly recovering sales activity, this suggests that resurgent interest in the residential property market has driven prices higher. The increases come despite tighter lending conditions and higher mortgage rates that will price more people out of the market.

Key issues covered in this Report
●	The impact of COVID-19 on the estate agents market.
●	Trends and developments in the residential and commercial property markets.
●	Why COVID-19 is driving a shift in house buyers’ preferences.
●	How affordability is shaping the property market and first-time buyer preferences.
●	How Stamp Duty Land Tax changes will affect the market.
●	Insights on consumer preferences and participation in the property market.

COVID-19: Market context
The first COVID-19 cases were confirmed in the UK at the end of January 2020, with a small number of cases in February. The government focused on the ‘contain’ stage of its strategy, with the country continuing to operate much as normal. As the case level rose, the government ordered the closure of non-essential stores on 20 March. 

A wider lockdown requiring people to stay at home except for essential shopping, exercise and work ‘if absolutely necessary’ followed on 23 March. Initially, a three-week timeframe was put on the measures, which was extended in mid-April for another three weeks. 

The Health Protections Regulations 2020 came into effect on 15 June allowing the reopening of all non-essential stores in England as well as the mandatory use of face coverings on public transport. Pubs, restaurants, hotels and hairdressers were able to reopen on 4 July, with many beauty businesses following on 13 July.

From 24 July, it became mandatory to wear face coverings in shops and supermarkets. Rules on travel remain fluid: from 10 July, travellers from more than 50 “low risk” countries no longer had to self-isolate for 14 days, but on 28 July the removal of Spain from this list of low-risk countries dominated headlines in the UK, and by August further countries (including France) had been removed from this list.

On 12 October, the Prime Minister announced new local COVID alert levels for England. Each area of England was assigned an ‘alert level’ – medium, high or very high (otherwise known as ‘the three tiers’). People living within high or very high tiers were not allowed to socialise with anyone outside of their household or support bubble in any indoor setting.

On 5 November 2020, these tiers were replaced with a nationwide lockdown in England, which is in place until at least 2 December. This includes restrictions on domestic and overseas travel, except for essential work purposes. As of 1 November 2020, Scotland had its own five-tier system of restrictions but no national lockdown had been introduced, whilst Wales had introduced a short ‘firebreak’ lockdown from 23 October-9 November.

Economic and other assumptions
Mintel’s economic assumptions are based on the Office for Budget Responsibility’s central scenario included in its July 2020 Fiscal Sustainability Report. The scenario suggests that UK GDP could fall by 12.4% in 2020, recovering by 8.7% in 2021, and that unemployment will reach 11.9% by the end of 2020, falling to 8.8% by the end of 2021. 

The current uncertainty means that there is wide variation on the range of forecasts, however, and this is reflected in the OBR’s own scenarios. In its upside scenario, economic activity returns to pre-COVID-19 levels by Q1 2021. Its more negative scenario, by contrast, would mean that GDP doesn’t recover until Q3 2024.