The coronavirus pandemic has had huge impacts on all parts of the property industry, with the market effectively on pause mode from March 23 to May 13 and many construction sites closing down.
But has it affected some parts more than others? We spoke with Simon Barry, head of new developments at Harrods Estates, to get his views on the luxury market, the incoming stamp duty surcharge on overseas buyers and how long-term social distancing might affect London’s second homes market.
How has Harrods Estates been affected by the pandemic?
It was frustrating to have business interrupted and to cancel planned viewings with clients over the Easter period. However, the pandemic did not affect our sales pipeline and we were very encouraged when everything under offer went through to exchange during lockdown with only a couple of exceptions – and we even had one completion.
After a very strong Q1 performance in 2020, it looks like we will have an excellent Q2 financially. In terms of new activity, it went dead during the first few weeks of the lockdown. But then we started to see the level of enquiries increasing and we’ve been much busier over the past few weeks to the extent we had buyers and tenants waiting to view as soon as restrictions were lifted.
We did our first viewings on Thursday 14, less than 48 hours after new government guidelines were issued, even though these are now subject to rigorous Covid-19 safety procedures and need time to set up.
We’ve used the last two months very productively and taken the opportunity to review all our marketing collateral and reassess the way we work. We’ve invested heavily to ensure all our staff can operate remotely with full access to virtual property tours and video conferencing for clients and applicants.
And we started preparing our offices for re-opening right at the start of lockdown, redesigning layouts to ensure we could operate with social distancing in place and stocking up with face masks, sanitisers and everything else we’d need to protect customers and staff.
Will the luxury property market bounce back quicker, as it did after the global financial crisis, but with lower price points at play?
Most of the sales we deal with are discretionary rather than driven by actual housing needs, though our rental market will be affected by when universities reopen and by levels of recruitment in the financial and business services sectors.
So prime markets have the potential to pick up where they left off, and naturally buyers will be looking to sellers for an incentive to move quickly which could take the form of bigger discounts to asking price.
Will the UK market, and in particular Prime Central London (PCL), remain attractive to overseas investors despite Britain being the second-worst affected country in the world?
London may look more attractive than ever to many overseas investors given its relatively low housing densities and outstanding green space. The same applies to other locations in the UK.
Besides, we’re still a long way from having any consistency in statistical information from different countries on either infection rates or Covid-related deaths and the UK’s response to the pandemic has not been very different from that of any other comparable trading nation.
What is your general makeup of buyers and tenants? Part domestic and part overseas? Exclusively overseas?
Our buyers and tenants pretty much reflect the diversity of a London as a whole, with at least 50% being UK-based, but not necessarily of British origin.
What impact will the extra 2% surcharge on overseas buyers, introduced from April next year, have on the market? Will there be a rush of acquisitions before this date?
On past experience, it’s more than likely the surcharge will lead to a spike in sales ahead of the deadline – though an extra 2% in the context of any Covid-related economic slowdown and potential tax hikes around the world is unlikely to deter overseas buyers.
If, as seems highly likely, social distancing and travel restrictions remain in place for at least the rest of the year, how would this affect the luxury second homes market in the UK? Can you get round this with digital means?
In many ways the restrictions on viewing may make our jobs easier as it will force potential buyers to review properties remotely and think harder about their preferences and requirements prior to a physical viewing.
Of course, we’re concerned about travel restrictions and specifically quarantine for overseas buyers. But we’ve always had to fit with the travel plans of our clients, so we’re used to being patient.