Restricted Movement – The Impact of COVID-19 on Property Lettings and Sales
Every aspect of daily life has changed dramatically over the last number of weeks. As an estate agent, like everyone in this profession, I have changed how we operate to protect our clients and staff; complying with social distancing requirements and travel restrictions while continuing to manage the lettings and sales of properties.
“Staying at home” is essential to keeping everyone safe and well at this challenging time. It also has significant implications for tenants and landlords as well as those involved in the sale of a property. How are the changes in legislation and COVID-19 restrictions impacting the letting and sales of properties?
Live and Online
Face-to-face viewings have been replaced by virtual viewings, which have become very professional and effective. A video walk-through shows viewers the property in detail, pointing out features and providing a thorough commentary. A time is scheduled for prospective tenants to view the property video online during which they can ask questions. Interested parties provide their details and the owner makes the final decision. To eliminate document handling, agreements and inventories are signed electronically using DocuSign. A secure lock box, where tenants can collect the keys using a code ensures no unnecessary contact is required. It is worth noting here that tenants will rent a property from a virtual viewing, but it is not so easy for a prospective buyer to do so without physically seeing the property.
The Emergency Measures in the Public Interest (COVID-19) Act issued a blanket ban on tenancy terminations and rent increases for the duration of the emergency period. This applies to any notification of termination or increase served before the emergency period. A tenant with tenancy of less than six months, now has a 90-day notice period, (previously 28 days) for the duration of this crisis. Tenants are expected to pay rent and any arrears that are accrued (but this would be extremely challenging for a Landlord to enforce). Alongside the legislation, the Government has introduced the COVID-19 pandemic unemployment payment. Those who have lost their job or have had their hours reduced are eligible for this payment. Currently €350 per week, but this may change. Rent supplement, based on rent and income is also available.
Banks are offering landlords experiencing financial difficulties a 3-month break on mortgage payments. Essentially this a mortgage restructure with additional interest to be paid and higher repayments after the break. Initially there were concerns that this break would impact the homeowner’s credit ratings, however clarification has been given that this is not the case.
Compromise is key
Both tenants and landlords are impacted by the situation and how they manage it is very much on a case by case basis. Many landlords have been able to grant a rent reduction, but there are others who simply cannot afford to do so. It is worth reiterating that any “mortgage holiday” the landlord gets from the bank does have to be paid back, but any reduction in rent given to the tenant does not. A middle ground will need to be found.
Getting over the line
In general, in transactions where contracts have been issued and everything is proceeding smoothly, buyers are willing to close out the sale. If contracts have yet be prepared or signed, there could be significant delays. Sourcing title deeds and organising finance from the bank are likely to take a lot longer that they would in normal circumstances. This is causing other issues with buyers concerned that their mortgage will expire before the sale in finalised. In the UK, banks are extending mortgage approvals by 3 months. Following the UK’s lead s, it looks hopeful that Irish banks will do the same which will give the prospective buyer a bigger window to find their new home. However, there is no specified time period as yet.
Pause for thought?
For those engaged in the process who have seen their financial circumstances change dramatically and still have option to withdraw, there is a decision to be made. In the case of the purchase of a family home and especially if it has taken a long time to get to this point, buyers are tending to view the current situation as short term and their purchase as a long-term investment worth pursuing. In cases where properties are sale agreed, both buyer and seller are negotiating the sales price to reach a mutually agreed figure, typically between 5% – 10% of the purchase price.
Unlike any previous crisis, this one is not a reflection of any change to the underlying market conditions. In real terms, house prices may fall slightly in the short term, but demand will continue to be strong. We cannot be sure of the true impact until we reach the end of this crisis, but we can look towards China to see what recovery looks like and what the timeframes are. Reports from China Index Holdings show that in February the number of residential sales transactions fell by 40 per cent, with prices falling by only 0.24 per cent. If you were considering selling your home, there are some lessons to be learned from the current situation. The hope would be that the world will be a very different and more active place in September, which is traditionally a good month to market a home. This time that we have at home is an ideal opportunity to make many much needed repairs to the home and prepare it for going to market.
If you are planning to let or sell your property and would like to discuss any of the points raised here, please do not hesitate to get in touch with me. Email me at email@example.com or call me on +353 1 2164724/+353 86 1618471 and we can arrange a time to talk. I would be delighted to provide you with my experience and expertise to help you manage your specific situation.