With lockdown measures in place until at least May 7, and possibly for much longer than that, the new normal is going to remain us with some time yet.
But how can the property market bounce back from the Covid-19 pandemic once things have calmed down and some sense of normality is restored?
Property Investor Today checked in with Alex Willcocks, a property developer, home stager and director of Burbeck Capital, to get his thoughts on how the property market might recover.
How can the property market return with a bang once the worst of the crisis is over?
We have seen a lot of speculators taken out of the market over the past five or six years. Developers in the SME space now tend to be proven operators with decent track records and lending relationships.
As such, the consistency of the product has risen, which is crucial in hedging against price drops. Obviously, it’s well-documented that demand has fallen off a cliff since the shutdown of the property market. However, supply has been decimated for the previous 18 months given the Brexit impasse.
As such, we don’t feel we are going to need a bounce back in our markets as this is more of a pause or temporary freeze. Given the heat in the market in January and February earlier in the year, coupled with the latest Knight Frank research suggesting a 3% price reduction across the sector due to Covid-19, we’re confident our exit values still remain strong.
How can companies reposition themselves for when normal life resumes?
We have always put product front and centre of what we do, quality builds with bespoke interiors have been the foundation of our ROI. SME developers have to constantly raise the bar on what they are bringing to the market, and how they are bringing it to the market.
A comprehensive strategy of how to dispose of what is being built will be crucial going forward. I would personally like to see a more constructive relationship between all concerned parties: land agents, developers, estate agents and home stagers. The results are significantly better when they are all working together.
What will the property industry look like when this crisis subsides? Will there be much more of a move towards remote working, virtual viewings, enhanced use of tech, etc?
This is dependent on how long the lockdown lasts. For us, it will continue to emphasise the importance of selling fully dressed properties via excellent estate agents. Virtual viewings might provide a stopgap for properties already on the market, however there is no substitute for a client walking around the finished product in person so this won’t be phased out at all.
Figures suggest the impact of coronavirus on transactions could be devastating and may last until Q3 2021 - what can be done to mitigate this and will it be as bad, or worse than the property crash during the global financial crisis?
I think it's important to differentiate between primary and secondary markets. We have known for some time there has been a massive dislocation between newly developed stock and lived- in properties, with the former significantly outperforming the latter.
Transaction numbers will, of course, be down. However, best-in-class properties will still achieve the required prices, anything that falls sort of that will suffer the consequences.
How has your own company been affected by Covid-19? How are you remaining ahead of the curve so you're ready when demand hopefully bounces back?
From a development perspective our current builds are all early-mid stages, which is the best place for them to be as we have been able to maintain progress on the sites via social distancing and enhanced health and safety.
We expect to finish one at the end of Q3 with the next at the end of Q4, which timing wise works. As a team we are busy refining the finished interior, constantly trying to improve on the aesthetics and design. The better our product, the better the ROI.
Will Burbeck Capital be changing its approach in any way when normality resumes?
We have always taken the approach to geographically hedge our risk. Running multiple sites across different boroughs has provided a good hedge against volatility. This along with the approach of developing units with a max resale value of £1,000 per sq ft has provided fluidity in what many have found a stagnant market. We are confident in the product that we bring to market and the demand for it.
When will people be comfortable investing in property again? Could the sense of uncertainty be as restrictive to the market as the impasse over Brexit was?
This is obviously dependent on one's risk appetite. We believe there are going to be some really good opportunities in the market in the short-term and will look to do what we can to take advantage of them.
Tell us a bit more about Burbeck Capital...
We are a family-owned residential development business based in Richmond, London. Within the SME space, our focus is on the acquisition, re-development and design of period properties in affluent boroughs across South West London.
Our particular focus is converting oversized single dwellings into multiple units. We are currently delivering £6 million of sites in 2020. Alongside Burbeck Capital, we also run Burbeck Interiors (home staging and property styling) and Burbeck Project Management (end-to-end design and build).