Beauchamp Estates identifies three distinct phases to coronavirus crisis for Prime London property market

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There are likely to be three distinct phases to the current Coronavirus (COVID-19) situation in terms of how it affects the Prime London residential property market, according to Beauchamp Estates, with each phase in the cycle having an impact on household and consumer behaviour, spending priorities and the property market.

Beauchamp Estates says that the first phase in the cycle, lasting a few months, is likely to revolve around a quarantined London with business opportunities focused around virtual viewings, remote liaison and people making reservations on properties, especially new build or unoccupied homes. During this phase luxury rentals are also going to be in strong demand particularly as most London hotels have closed down.

 
The second phase in the cycle, lasting some months, will be when people have taken a virus-antibody test and, if some level of immunity is proven, are able to return to things such as office work. This phased return to work, which China is now starting, will help assist the economy and property market, even if bars, restaurants and clubs remain closed. The third phase is a lifting of quarantine measures and a gradual return to business activities.
 
Beauchamp Estates forecasts that this third phase in the cycle could happen between October 2020 and March 2021 with the London economy and property market anticipated to have a “mini-boom” similar to that which occurred post-Brexit when the capital had over GBP750 million worth of deals for properties priced above GBP5 million in just a few weeks as pent-up demand was released and buyers purchased properties they had coveted during the Brexit stagnation period.
 
Beauchamp Estates highlights that forecasting how events are likely to unfold in the London property market is difficult at present since each week brings fresh news regarding the Coronavirus pandemic and the UK and overseas government’s responses to events. However a review of how the Chinese, Hong Kong and Singaporean property markets have performed over the last four months highlights some potential outcomes for London. It has led to Beauchamp Estates to devise the three phase “traffic light” style evaluation of how the Coronavirus cycle will impact on London’s property market.                                           
 
Beauchamp Estates says that London is currently in the first phase of the Coronavirus cycle which is likely to go on for at least two to three months (April and May, and possibly, June 2020). This first phase is characterised by strict quarantine for all households across London, home working and all shops and leisure facilities apart from food supermarkets closed.
 
Beauchamp Estates calculates that during this first phase in the cycle, the market for second-hand occupied London homes priced below GBP5 million is likely to see a 60 per cent - 90 per cent drop in volume of sales over the first six months of the year (Q1 and Q2 of 2020) with completions delayed until the quarantine lifts. 
 
For London homes priced above GBP5 million Beauchamp Estates believe that the drop in volume of sales will be considerably lower since the level of transactions priced over GBP5 million and over GBP10 million is much lower and many properties are unoccupied and acquired by “cash buyers”. Any impact on prices is likely to be minimised as most buyers are just delaying their purchases rather than walking away.
 
The Beauchamp Estates forecast is informed by the latest LONRES data for London residential property sales between the 1st January and 7th April 2020 and the data for the same time period in 2019. The LONRES data shows that overall London residential property sales are down 34 per cent compared to 2019 whilst sales of houses are down 46 per cent and deal fall throughs are up 85 per cent on last year.
 
However the proportion of London properties being sold at asking price is actually 59 per cent up on 2019 (during the Brexit stagnation) which is why Beauchamp Estates has highlighted that values in the above GBP5 million marketplace have held firm, although prices have dropped for the below GBP5 million marketplace, especially for second hand, occupied properties, where deals have been stalled. 
 
Beauchamp Estates calculates that during the second phase in the cycle, as some Londoners return to office work, this should help to unlock the property market and the volume of sales should begin to stabilise. During the third phase in the cycle, taking place at either the end of 2020 or early 20201, the Prime London property market is likely to see a 20 per cent rise in transactions and a wave of deals at all price levels as pent-up demand from the months of quarantine is released.                   
 
Beauchamp Estates highlights that unoccupied properties, primarily luxury new homes, unoccupied dressed properties for sale and unoccupied lettings properties are the key instructions where business continues, focused around applicants being briefed remotely about properties via virtual viewings, videos calls, emails and telephone calls and people making reservations.
 
As the Coronavirus lockdowns have begun to lift in China, Hong Kong and Singapore applicants have begun to make enquiries about properties in London as they respond to a favourable exchange rate and a desire to take investment out of the turbulent stock markets and put it into fixed assets such as prime real estate.
 
Beauchamp Estates says that the Prime London lettings market has remained active. In the current marketplace tenants priorities have changed, with address less important than space, with tenants wanting a large home where they can self isolate which provides an abundance of living space, bedrooms and large private garden.  
 
As other income generating opportunities such as the stock market have shrunk, landlords have focused more on their property portfolios, resulting in them being more flexible with in discussions with tenants over rental levels, deposits and terms.
 
Landlords are also seeking medium to long term lettings agreements with tenants since they know that the halting of tourism and international business travel will have a huge impact on London’s annual short-term summer lettings market, with far fewer Middle East and Asian summer visitors likely to be in London this year. 
 
Beauchamp Estates highlight that the most experienced estate agents and developers have switched their businesses to remote working, embraced virtual viewings and focused on on-line marketing and social media promotion. The ‘forced’ implementation of this new virtual tours technology will prove a ‘test case’ for both consumers and the property industry. If successful, virtual viewings and remote deals could become part of the new normal.
 
Beauchamp Estates say that early indicators show positive uptake by international investors and the firm has partnered with online technology firm Reevo 360 which enables buyers to remotely view a property and link up with a sales agent to take a guided virtual tour. Already a buyer in Asia has just had his offer accepted on a GBP20 million London townhouse, seen only via video.
 
Gary Hersham, Founding Director of Beauchamp Estates says: “It is difficult to forecast how the London property market will perform during the Coronavirus pandemic but China and other Asian countries have started the second phase of the cycle which is why we feel the London market will go through a series of distinct phases. Our clients expect us to adapt which is why Beauchamp Estates has launched a special virtual viewings portfolio, stepped up marketing online, switched to remote working and is overall staying active.” 
 
Jeremy Gee, Managing Director of Beauchamp Estates says: “The future is unknowable, however we calculate that there will be three distinct phases to the Coronavirus cycle and how it impacts on the London property market. The current lockdown phase, characterised by virtual viewings and remote deals; a second phase where early investors will be active in the marketplace; and a third phase where normality starts to return triggering a Post-Brexit style “min-boom” where pent-up demand is released and we see a wave of property deals.”