Obviously the biggest cost of all throughout the Covid-19 crisis has been that of the thousands of lives lost, but the economy has also been deeply affected. Here we will focus on the financial cost to the property sector.
As the housing market returns to pre-covid norms we are now in a position to take stock and assess the impact of the pandemic. Lockdown caused a significant drop in both new listings coming to the market and sales being agreed. In comparison our analysis shows that for the number of exchanges, whilst there was a decline, there has been a much faster rebound.
285,000 new instructions lost
238,000 sales agreed lost
59,000 exchanges lost
To assess the below charts, we have the split the timelines into 3 loose categories:
- Pre-Covid - the period before lockdown
- Covid - during lockdown
- Post-Covid - once restriction to the housing market were lifted
The Cost of Covid-19 on New Instructions
The chart above shows the number of new listings that have come to the market from early February and onwards. At the beginning of the year, the volume of new instructions ranged between 5k - 6k per day. Once lockdown was put in place we see the decline almost immediately, with volumes remaining below 1k for a number of weeks. It finally begins to recover around May 13th in line with restrictions being lifted.
The volumes before and after lockdown are very similar so it’s reasonable to suggest that had the pandemic not taken place, these volumes would have continued during the lockdown period, erasing the trough completely.
This has enabled us to count the cost of Covid-19 to new instructions for the first time. Based on pre and post Covid volumes, we would have expected to see around 837,000 new properties listed, instead, we saw 552,000. This is a loss of 285,000 or a 34% drop in new instructions.
In monetary terms, if we assume that all agents sell 65% of what they list, charging 1% commission on an average house price of £232,000, this would equate to a loss of around £430m in Estate Agent commission alone.
The Cost of Covid-19 on Sales Agreed
The impact on sales being agreed is remarkably similar to new instructions.
Here, based on pre and post Covid volumes, we would have expected to see around 657,000 sales being agreed during the lockdown period. Instead, we saw 419,000, which is loss of 238,000 or a 36% drop in sales agreed.
Again, in monetary terms, following the assumption that all agents complete 85% of their agreed sales, charging 1% commission on an average house price of £232,000, this would equate to a loss of around £470m in Estate Agent commissions.
The Cost of Covid-19 on Exchanges
This is where the story starts to a look a little more positive. Whilst there is a significant decline in exchanges during the lockdown period, the trough didn't last as long and consequently had a far lesser impact.
In fact, we would have expected the volume of exchanges to be around 365,000 had the pandemic not taken place. Instead, we saw 306,000, a loss of 59,000 or a 16% drop in transactions.
If we assume that all agents sell 100% of the properties they exchange, again, charging a 1% commission on an average house price £232,000, this would equate to around £137m in Estate Agent commission.
So, what does this actually mean? Broken down it shows that the majority of consumers refrained from listing their properties for sale and agreeing new sales during lockdown. However, those already involved in a sale continued to progress in much greater numbers than we would have expected.
Nobody knows if Covid-19 is over yet but if the current volumes remain, a loss of 59,000 sales seems like a relatively small price to pay, especially considering the catastrophic loss to life experienced in the UK.