Covid-19: Understanding the Changed Marketplace

It has been quite a chaotic few months and, understandably, the focus of our team has on supporting Castlehaven Finance clients with ongoing projects, while keeping a watching brief on changes impacting or likely to impact the construction sector. So it was interesting to gain some wider industry perspective this week through an Irish Examiner article by Conor Power titled ‘Changes afoot at foundation level?’, wherein he interviewed property professionals who shared some insights on the marketplace since property businesses reopened last month.

There has been much written about the changes in property consumer behaviour since the start of the pandemic and the Irish experience appears to be similar to trends remarked upon in the UK. Over the period of lockdown, many people have experienced an unprecedented level of lifestyle change that has caused a rethink in both their work lives and in their personal lives. As a society, we appear to be in the process of re-assessing the way we do simple things in our lives, almost like a “root-and-branch” examination of our priorities and how we are spending our time.

And it looks like the Government is in the process of doing the same. Policies that were put in place by the previous Government at the start of lockdown would have been thought impossible just weeks or months prior to the pandemic. Affordable housing is at the top of our new Housing Minister’s rather extensive ‘to do’ list. The Coalition parties have announced a plan to increase the number of new homes to be built annually to 50,000. Despite previous political commitment to increasing outputs, actual delivery continues to fall short year after year (since 2012). But now is not the time for political cynicism. It is heartening to see the new Minister get off to a strong start. This focus on facilitating the delivery of affordable housing is positive for younger people entering the housing market for the first time.

One of the insights from the Irish Examiner article is to prepare for the worst. In terms of sectoral resiliency – from industry to consumer –  we must provide for future “shock events”. Buyers are starting to be more realistic, focusing on what they need rather than what they want. They are putting more emphasis on quality of life over “fluffy extras”. Interestingly, according to estate agents, many people are prioritising buying a piece of land rather than extending what they already have in order to prepare for any future horror events.

With auctioneers going back to in-person viewings, extra safety precautions are being taken for every property viewing. The virus has not gone away and there is a reportedly high level of compliance with the new IPAV/SCSI/HSE protocols to ensure safety when inspecting houses. These new measures provide for viewings by appointment only, leaving adequate time to ensure the property can be sanitised and disinfected between each viewing. According to one estate agency, the same amount of work is being done, but at a much slower place.

It is still too early to distinguish between the figures and the more anecdotal evidence, however, it appears that demand is stronger than ever before so fears of a sluggish market restart have been cast aside – for now. Of course, this might be a post-lockdown bounce as a result of pent-up demand. It will be interesting to see whether or not this busy work translates into transactions.

It is significant to note that agents quoted in the Irish Examiner article reported that prices are stronger than ever, with little or no change seen in certain properties. One Tipperary-based auctioneer confirmed that he had sold more properties over the past three weeks than his firm did in the first three months of the year.

This good news does not tally with reported levels of mortgage lending – to be fair, there is a degree of time lag here that might account for the difference. The next few months will be very telling for the market. For many people, borrowing ability has been made difficult due to Covid-19. Through the Wage Subsidy Scheme, many employers retained staff based on the Government subsidy of 70% of wages. As a result of this, some lenders are disregarding the subsidy and only considering the 30% level as the income of the applicant, which in turn makes people ineligible for mortgages that would have been approved pre-lockdown.

On the construction side, Conor O’Connell, Director of the Southern Region of the CIF remarked that “the initial reports following the re-opening of the construction sector following Covid have been positive – better than a lot of our house-building members would have expected. The market response has been good, interest has been good… better than we had anticipated.”