Super Saturday - Covid and Property thoughts

The Covid situation continues to evolve at an alarming rate. Some very strange things have gone on in a strange order which it is worth recapping.

I will avoid political points in this article and will not seek to engage those who have more outlandish views on the virus, mind control, lizards and flat earths etc.

The hammer effect of the lockdown did its job - at an as yet unknown economic cost. Many are considering the cost, falsely, as if it was all attributable to the lockdown - whereas using the example of Sweden, with limited measures and no lockdown - there has still been really significant economic hardship. The correct way to try and unpack these situations is to consider the marginal difference rather than the whole problem - for some reason that is a hard concept to grasp (it is also effectively impossible to measure and needs to be estimated).

Incoming passengers were not addressed until relatively recently - and there seems some irony that all the countries in western Europe with the worst record so far of controlling Covid all have "airbridges" with the UK - which would seem to defeat the object somewhat.

We have one local lockdown and others on the cards it seems.

Anecdotally this week I was at a viewing with 5 other people. 2 of the assembled company (both by inspection it seemed to me to be in a higher risk category) made some great quips around social distancing - before I could get involved, another of the assembled company had soon shot them down - but it speaks to some of the attitude that is out there, I feel.

We have a frenzy which is very much in the boosterism mould - "Super Saturday" today with some pubs opening for breakfast. Will it be super? Probably not if you work in A and E. Weird but strategic in my view. Get people spending at all costs.

There's a fair pushback on some of this. The idea of the lockdown was to ensure no NHS overwhelm (that might well fail for different reasons around 1am tonight). However, I'd argue that the government's role is to provide quality data, information, guidance and transparency - and then leave it to the people. We can all decide for ourselves whether that simple objective is a) reasonable and b) has been fulfilled.

So......how is it playing out in the property market?

Again anecdotally I'm hearing of the first signs of a softening. I'm seeing them too with more realistic vendors and more reductions on rightmove (expect a headline next week). The jobs news has been "under-shouted" I'd say - 15k jobs went in 48 hours early this week but some large companies had started redundancy consultations earlier. Many are ongoing with inevitable losses because forecasts for the post-Covid world are so bleak and this year's growth targets in 90%+ of businesses lie in tatters. This news is starting to influence people and the press will no doubt follow and descend on the falling knife when it happens - driving it down more swiftly and brutally.

However - we've got some policy news coming soon without a doubt. Pleas are being made for industry specific furlough. The performing arts is in gigantic trouble. Anything requiring large gatherings over any sustained period (over 30 mins) has consistently (unlike reports, data and theories on masks, for example) been cited as one of the most dangerous events, particularly when the gatherings are inside. So there are serious issues for concert venues etc. For some time to come.

On the flip side we also have build build build news and commercial conversions look to be, correctly, being significantly encouraged. There will need to be some exceptional schemes in some of the old large department store buildings to keep town centres alive. I suspect at some point next year some town centres and high streets will be 50%+ void, hopefully it will be picked up by the developers and put to some use. Grants for conversion of such buildings if used for social housing purposes (for example) might be an idea, if support providers are in place, in low value areas where conversion won't stack up. Not ideal but better than ghost towns.

Stock looks to be increasing at auctions so we might expect some sensible purchase prices in the next couple of months.....perhaps not in July but hopefully August/early Sept.

Rents (particularly by the room) seem to be struggling in high value areas where there is pressure on affordability - percentage drops in rents seem to be smaller in lower value locations for rooms or non existent.

On the flip side - my single let rents are holding up and even growing slightly. We are continuing to be very cautious in the underwriting of our tenants and prospects and taking views on affordability and sustainability of their employment.

For some it will have been another frustrating week maintaining a watching brief - but the best advice is to stay calm, stay sensible and use this time to sharpen skills and educate yourself, watch and learn if all around you on the market is going crazy. This isn't a time to overextend yourself or overpay for a property (or anything). Remortgage business is easing and loans are completing, and products are returning to the market. It is a good time to be remortgaging and holding cash if you are not already, in my view.

People are liquid and I understand itchy fingers but remember the Buffettism for today - focus on return OF investment first and return ON investment second.

If you are braving pubs or restaurants this weekend - stay safe and be sensible!

As always comments and thoughts very much encouraged.