Up until two weeks ago, the property market in Scotland was roaring, firing on all cylinders and accelerating away. The post-Brexit bounce was in full swing and people who had been sitting on their hands for years were active as puppies.
Now, thanks to Coronavirus, the door has slammed shut, first on commercial business – particularly in leisure, hospitality and retail – and now on the residential market with the government’s injunction last week (March 27) that people should not even think about moving house at this time.
The response to the Covid-19 outbreak has altered all our lives in ways that even the most fervid imagination would not have dared to predict and, in these early stages of the fightback, there is a palpable sense of unreality.
But is real, only too real, and the measures that we collectively put in place now will determine what the economy will look like when, as we will, we eventually come out of the other side.
What is keeping many people going is the certainty that the disruption to normal business, unprecedented though it may be, will be temporary – though how temporary remains itself uncertain.
The recovery, I believe, will hinge around timing. That will be so important. If people are still able to go about their business within the current controls of social distancing and isolation, then a market can function.
The market needs people to be able to view properties safely, it needs surveyors to be able to supply reliable valuations to lenders and it needs lenders to have confidence in these valuations.
Confidence is vital in this period of major distortion, since lenders are instinctively cautious and risk averse, and valuation integrity alone won’t allow the flow of properties into the market to continue.
That is most likely to happen, and we are most likely to climb back to pre-virus levels, if the period of nil activity is short. The longer it goes on, the less likelihood there is of that happening.
The stop/pause period we have just entered is designed to run for three weeks, in the manner of a temporary suspension of a financial market to stifle disorderly activity. It is, however, looking increasingly likely that the initial three weeks of lockdown will be extended. We will simply have to live with this.
If, after a period of weeks thereafter, we can go back to working very carefully in controlled conditions; if the Registers can register titles; if valuers can provide guidance; if lenders can supply funds; and if lawyers can complete transactions, then people will once again have the opportunity to trade.
In commercial property, there is little doubt that people’s occupational requirements will be of a different size and shape, and there may be a flurry of compelled sales as owners scramble to convert properties into cash.
The momentum we saw in the first quarter of 2020 has every chance of continuing if we can get back to business without a protracted period of delay. If we cannot, there’s a real risk that the market may see a rise in compelled sales, and a surge in supply.
We have to recognise that the Government has implemented extraordinary financial support measures but, for some businesses, these inevitably involve taking on more debt. If borrowing is necessary to pay overheads, the model is basically unviable for any length of time.
The leisure sector certainly has had as much help as it is possible to give but, even with this stimulus, the sector is unlikely to come back in the same shape and size as before the wrecking ball hit.
It already underwent a major shakeout post-credit crunch and, although the market was going well at the beginning of the year, there probably was a bit of over-capacity in some areas so a further thinning may be on the cards.
To sum up, if the pause button is pressed for a relatively short period of time, there is every possibility the market – both residential and commercial – will start up again close to where it left off and continue through to the end of the year.
It’s all in the timing.