Property Market update 31/08/2020 - evictions and economy

Sunday's supplement this week comes at you on a Bank Holiday Monday......

Another turbulent week which has a large dose of Covid-inspired changes continuing to come down the pipeline. In a situation very typical of the modern press, there was a huge fuss over the eviction ban extension for 4 further weeks and the move towards 6-month notice periods for the foreseeable future. However, when the news broke (in typical government fashion for 2020 - understandable, because it is a very dynamic situation) that this would NOT apply to anti-social behaviour, domestic abuse situations, and also indeed that tenants would not be able to rack up debt ad infinitum (6 months in arrears, rather than 6 months arrears, seems to be the implication) - since this is not as "clickbaity", it got a lot less traction, sharing and coverage. Well after this announcement over this Bank Holiday many commentators have been shouting about the one side without tempering it with the amended comments. I don't understand this, and I don't think it helps anyone either affected by the situation or potentially affected by the situation.

Decent news for investors this week as tenant demand hit an all-time high - there is an element to which the longer-term pressures will be biting, and there is also an element to which Covid has had an effect. Houses are selling faster, fewer deals are falling out of bed, and prices are also rising. A timely reminder - the market can stay irrational longer than you can stay solvent. There seems no good reason for this to happen - the stamp holiday has injected further momentum into an already booming market, and agents are reporting that they have never had it so good. It will last as long as it lasts.......

The reports of working from home and the larger companies attitude towards it continues to rain in. Many bigger companies are taking one of three positions: 1) Continual working from home all the way from hereon in 2) Working from home for the next couple of years 3) Moving to a "2-2-1" setup, with 2 days in the office, 2 days from home, and 1 floating day per week. Will the SME service companies continue with this trend? We are still seeing footfall down by a huge huge percentage in city centres, and "ghost towns" are starting to be talked about seriously. I personally have been talking for a few months about massive repricing of formerly "blue chip" assets as a drop of 10% in office demand in the cities looks an absolute given and that drop in demand could manifest itself as highly as 30-40% over the next few years as leases expire.

Offices not ripe for conversion run the risk of being redundant buildings. We have not in the UK largely dealt with deserted real estate (as they do in the USA for example, or don't deal with it more accurately!) but there will need to be sweeping changes. The risk of commercial property has been highlighted gigantically in 2020 that's for sure.

I view the value destruction that is occurring this year in the prime city assets as something unlikely to reverberate too strongly throughout the economy. These are the assets of the 1%, generally speaking, and the man on the street will not feel it. It does not favour pension funds - that is true - but the economic shellshock from this is likely to be very small compared to the economic impact of trying to "pay the bill" for the current Covid measures (and future ones as well). The cities - just like the high streets - will morph and change, but the reality of the market is that repricing will occur just as it does in any marketplace after a shock. Smaller settlements are likely to be the beneficiary as are small businesses, which should actually favour the economy as they are far less likely to be using exotic tax structures, and far more likely to be pumping that money back into the economy and/or employing people.

One figure that will hit no headlines at all is that 87% of landlords when contacted to discuss a rent deferral or a rent break, during lockdown, agreed to that concession. Well done to the 87%.

One unmissable thing for the week ahead - we have a fantastic PIP Taster event (link in the comments) that is sharing the results of a great workshop which some PIP partners, members and hosts participated in two weeks ago - it helped me form a lot of clarity with my actions and tactics in the early stages of Covid and this latest iteration has some great information packed within it in the dynamic environment we find ourselves in!

Enjoy the rest of the bank holiday.