In normal times, the end of June is the ideal time for a mid-year review of the property market. An examination of the market data, in the various sectors relating to supply, demand, price, and viability will be essential. Also, the trend in prices and their analysis will give strong statistical suggestions of the future market in 2020.
We are not living in normal times, and the new normal will be radically different and uncertain.
There is no realistic data for the new market relating to supply, demand, and viability. It will not be available until year end 2020. It has no great relevance, at this time.
The psychology variable relating to household attitudes, market sentiment, and crowd/herd behaviour, in these uncertain times, is now the paramount market variable.
It is impossible to forecast the new property market for 2020/2021. We have never experienced a pandemic before. We have never experienced a forced closure of the market for three months. Social distancing will obstruct our lifestyle and our use of all commercial buildings. It has been an unprecedented shock that will continue to plague our lives, certainly into 2021.
We need to examine and try to understand the emotive consumer responses, for the average household, that has experienced this shock that has created strong media images relating to death, anxiety, social distancing, higher costs, lower incomes, and unemployment.
In times of social distancing, the media has an enhanced and profound impact on moulding the household impact horizon. Brexit, which dominated the media in 2018/209, has fallen off the radar, but is just as important today. The pandemic is the most important story for the media, and it will continue to dominate our lives, and media commentary for 2020.
Brexit, which has been eclipsed by Covid-19 — is a good example of the single-minded attitude of the media — and hence consumers. Accordingly, the property market and the housing crisis will be lower order priority in these uncertain times.
Covid-19will have a very similar impact on the property market.
- Until a vaccine is invented, uncertainty will continue as a variable within the property market;
- The virus impacts strongly on people with underlying health conditions;
- The pandemic will strongly impact on individual businesses, or business sectors, which had exhibited underlying weakness prior to March 2020 (public houses, non-food retailing);
- The virus thrives in crowds. All building uses that create a ‘crowd’ environment will be impacted severely by the obligation for social distancing.
The immediate future priority for most households will be to establish the new normal of school, return to work, and reduced social outlets. The priority for most businesses will be the reopening of operations and the complexity of social distancing, remote working, and re-establishing customer contact.
Accordingly, new property contracts will be a delayed — or secondary — objective, certainly for 2020.
It is not all bad news. Some businesses will thrive or be less affected by Covid-19, pharma/health spending, food retailing, Government spending, agriculture, IT.
The overall impact is not known at this stage, but it is reasonable to assume less impact on large foreign direct investment (FDI) multinational companies — and the greatest impact will be on SMEs (small to medium enterprises) — particularly in the non-food retailing, hospitality, and aviation sectors. The virus will continue to cause commercial impact until a vaccine, or a drug treatment, is to hand.
Property price movement is the real measure of the virus impact. We are likely to experience a quiet or hesitant market until 2021, with few transactions — purchasers will delay engagement, purchasers will seek, or expect, a price reduction. Sellers will delay, or will be reluctant to change their price. Builders will not change their prices, certainly in the short term.
We do not know the price impact of Covid-19 — we have never experienced a pandemic before. Covid-19 is an event of major historic importance and the market will decide the impacts over the next 18 months.
If prices fall up to 10%, the impact will be manageable without severe market damage. Price variations in excess of 10% will cause major market impact on banking, viability, and consumer confidence.
Substantially, Covid-19 has been managed by community responses to mitigate risks. Similarly, the commercial impacts of Covid-19 will impact most households. If commercial recovery is managed as a community-based recovery, it will greatly assist market confidence and consumer confidence.
Except for those tragic households that experienced the virus, for most Irish households Covid-19 has been a psychological shock that has rattled consumer and household sentiment. Confidence- building measures across the commercial community over the next 18 months remain critical. We need a community-based solution.
Frank Ryan is a director of Cushman & Wakefield, Cork