How the #Coronavirus will affect society and the property market, (or are we facing the zombie apocalypse or a modern example of mass hysteria)
The Coronavirus outbreak has highlighted once again how fragile and interconnected our societies have become. We don’t know yet how dangerous and deadly COVID19 is but what we do know is it’s a powerful disruptor. For this reason I thought it would be useful and interesting to analyse what we know so far and look into my crystal ball and make some predictions about how this new disease will affect society in the short medium and long term. I’ll start by trying to summarise where we are so far and what the affects have so far been.
What we know for sure is that this disease has infected at least 90K people around the world, mainly in China and that the true number of infections is likely to be much higher. We also know it is more deadly the older you get but the headline death rates overstate the danger as they only include reported cases. When you compare COVID19 to flu, the death rate for which is around 0.1%, what you are currently seeing is a disease that seems to be on average twenty times as dangerous overall. However, what we don’t know is whether that 0,1% includes an estimate for unreported cases. If it doesn’t then the comparison between flu and COVID19 is like for like and therefore valid.
But, unlike flu which kills the weak whether they are young or old, COVID19 targets the old with the death rate climbing at a linear rate with every passing year. This is why the World Health Authority is advising over 60s, of whom I am one, to stay away from crowded places because the death rate is currently believed to be 3.6% at sixty and 15% at 80. This viral ageism also seems to affect transmission rates which are only 2% in under 19s but much higher among the old, no deaths have been reported in those under 9, so it’s more or less harmless to school children but could kill their teachers!
Aside from conspiracy theories about COVID19 being designed by Snowflakes to get rid of Boomers, if true COVID19 these findings present a greater challenge to old people individually and to us as a society. Age may not be the direct cause of susceptibility, it may be that in general we have more weaknesses as we get older and that one or of these weaknesses is what the virus attacks, like high blood pressure, low lung capacity, diabetes etc, it may be that super fit seniors with no underlying issues are not that susceptible at all, we don’t know yet. It may even be that susceptibility to COVID19 is as a result of statin use, or use of NSAIDs which increase with age, I’m not suggesting this is so by the way, just pointing out that age is a general term that hides many other possible causative factors.
Anyway, enough of the risk analysis which is sadly lacking in data, let’s move on to the affect COVID19 has had so far and what it’s likely future effects are likely to be on society and eventually and by association the property market. Let’s start with the biggest macro affect I think COVID19 is likely to have. I think it will act as an accelerant to all the main trends in society which are driven principally by technology and environmental issues. COVID19 is going to put change, which is already happening at an exponentially faster rate on the social equivalent of steroids. Specifically this means, amongst other things we will see a move to work from home, a retail move principally away from big crowded shopping centres and towards online shopping and home delivery, good for Jeff Bezos I guess, poor guy needs the extra cash.
Although I initially feared for the High St, I now think the High St may benefit as it will be more hyper local and less infectious! Education will go online faster, air travel in particular will be curtailed, we have probably passed peak travel, airlines will cut back, less cars will be sold etc, all these factors will have an affect on jobs and people’s finances
The NHS will experience a radical shake up, about time to. What could be stupider than gathering a bunch of sick old and vulnerable people in a small crowded room while they wait to see a rushed and overworked doctor when in 90% of cases the process could have been done better online. People will be expected to take their own blood pressure, keep medical records on smart devices that speak to their GP and have their medicines delivered. More complex tests will still need a visit but there will be so much less need for a physical appointment.
One of the areas that is a little less obvious is VR, virtual reality. It’s why Facebook is going to do so well because they own Occulus and COVID19 could easily create a transition similar to when the tablet pc was reinvented as the IPad. VR is clever but so far it hasn’t broken through COVID19 could provide the tipping point for VR, it’s moment may be at hand. Whilst on the subject of shares and the markets in general we have already seen how sensitive they are to uncertainty and how fast the speculators jump on any form of disruption to create short term money making opportunities. However, most of us can’t win by playing a hand that’s already over, we don’t have to tools to react fast enough and in my view we shouldn’t try.
Much better to look at the macro trends which means seeking out value and if you can buying, not selling into a falling market. I for example am buying oil stocks because of the great yields and because in the longer term I think oil prices will go back up. I’m not bothering with gold because I think it’s role as a store of value was ended with the gold standard leaving it as a largely irrelevant pretty metal that’s easy to speculate with. Let’s face it though, most people aren’t that interested in stocks and shares or speculating on financial markets but they are however interested in property, so what does all this mean for our industry, what current changes will COVID19 accelerate?
Before I answer this question I want to say what I think will happen with COVID19 over the next few weeks. Based on infection rates so far I think containment will fail, it probably already has and we will move into a mitigation or delay phase. This isn’t just defeatist acceptance and will still result in some draconian restrictions on movement and public gatherings. Companies will generally be affected, some vastly more than others, a few will benefit, it’s an ill wind that blows nobody any good. Individuals who can’t work and who have no savings could be in real financial trouble very fast and not all employers will have the money or the will to support them.
COVID19 will almost certainly send us into a recession and unlike in the last crisis, we are being to,d by experts that Central banks may not have the firepower to help all that much, except I think there is a potential upside, there always is. I believe low interest rates and low inflation have created the opportunity for the Government and the BOE to embark on the biggest fiscal and monetary stimulus of all time. Played boldly, this is an opportunity to build not only HS2 but to renew and upgrade our infrastructure and public amenities across the board and to do so without creating rapid inflation or devaluation.
The budget on March 11 is therefore a pivotal moment and a chance for the new chancellor to act decisively, seize the day and get ahead of this financial crisis before it has a chance to reek real devastation. As far as property is concerned look for reduced stamp duty, reduced capital gains and maybe even some relief for individual Landords. For companies look for reduced corporation tax and the continuation of entrepreneurs relief. For individuals look for reduced income tax and the merging of NI with income tax to create a new simpler unified tax. Outside of the budget look or the BOE to drop interest rates and reintroduce quantitative easing, maybe even make mortgages easier to obtain. Of course none of this may come to pass in which case it will be another missed opportunity.
As with everything that happens in life, it’s not so much what happens but how you deal with it that really counts. At the macro level this puts Boris, the BOE and our institutions on the spot, what we need is decisive visionary leadership to help us through this crisis with the best outcome. At a more micro level plenty of us with businesses to run will be faced with a multitude of challenging decisions to take over the coming weeks, we will need to interpret advice and set our own polices, working from home, self isolation, sick pay all spring to mind.
There will by my reckoning therefore be far reaching effects COVID19 will have on society, more home working the adoption of VR less physical visits to the GP and shopping centres, the acceleration of green pressures and many other unforseeable effects but what will happen to estate agency? There are two major issues here, what affect COVID19 is having and will have on the number of rental and sales transactions, which can only be deflated by the crisis and what affect if any will COVID19 have on long term changes in the industry.
This second issue is less clear than the first, we can forget the Boris bounce for the time being anyway. On the second issue, there could easily be acceleration towards home working and VR property tours but I think the biggest practical effect will be to drive ineffective financially weak agents out of business. There is already a cull taking place, or less worryingly a ‘consolidation’ and I can see this process gathering pace . Now more than at any other time it’s essential for even good agents to be open to change and take on board new and effective tools to help them attract new business. Unfortunately this isn’t an easy job because of the myriads of solutions out there, in my experience most of which don’t work, add no value, cost money and create confusion. However, if you can focus on being brilliant on the basics while trying to see the wood for the trees there are some tools out there that can really add value, attracting new business and helping you attract and keep the best people, because one goes with the other.
As Neville Chamberlain was famous for not saying, ‘We live in Interesting times’, and COVID19 has demonstrated once again that we can never take anything for granted, if we want our businesses to flourish and grow we have to respond to change, good or bad and do our best to make the best of it