In Wuhan, after weeks in lockdown, people are emerging from their homes and returning to work.
As residential sales offices reopen across China there is hope for a renewed energy in the housing market. Domestic transactions are on the up, with some 92.6m sq ft in home sales in March, three times the amount in February, according to Wind Information, as reported by the South China Morning Post.
At the same time, the UK housing market has been effectively frozen, with uncertainty in valuations, a bank clampdown on lending and government mandates to halt all but critical home moves.
But as China bounces back, some agents and developers are cautiously optimistic that a reawakening in Asia could see a valuable sales pick-up for the UK.
Off-plan opportunity
Last week, Galliard Homes flew out staff to reopen its new China sales office. Sales directors will relaunch operations following a two-week quarantine and third-party agents have already sprung back into action.
“This could be our only lifeline for, hopefully, a relatively short time,” says Ben Waterman, Galliard’s director of international sales. “We are seeing third-party agents and smaller agencies in China are pushing harder than ever. They are trying to make business happen and there are offers coming in.”
With mortgages on hold, completed stock is restricted to cash buyers. But discounted off-plan product, often requiring just a small cash deposit, is likely to be more attractive in the current climate. “If people think we’re in a decline, buying off-plan gives time for the market to bounce and for buyers to recoup,” adds Waterman.
Galliard is well known for its off-plan sales, typically pre-selling a third of a development, with a sizeable amount to Asian buyers.
But, while there may be some green shoots appearing the market, there is still a note of caution. Some are concerned about a potential second wave of the coronavirus in China coming alongside the increased movement of people, as seen in Hong Kong and Singapore.
‘A state of flux’
“The reality is that everything has come to a standstill,” says Robert Fraser, managing director at agent Fraser & Co. “Everything is in a state of flux at the moment, we just don’t know where we stand. We have five or six projects we want to launch, but everything is on the shelf at the moment.”
Fraser says sales may be trickling through, but they are nowhere near the level of last year and a resurgence could still be a few months off. Any new London launches will also be restricted due to mayoral policy, agreed by all the largest developers, that requires them to market schemes to local buyers first.
“We are still getting enquiries from various locations in Asia and the Middle East. People are just sitting on the fence,” he adds. “Maybe prices will drop back, that’s what a lot of people are thinking. The quicker we come out of this the better.”
While he hopes to be back in business by May or June, Fraser admits that September is more probable. But a significant amount of “pent-up demand” means that once operations start-up again, he is confident of a quick return.
Coronavirus discounts
A plummeting pound means the UK already offers something of a bargain for overseas investors, but as the pandemic spreads, many will expect a further “coronavirus discount”, says Mayer Brown’s head of UK real estate Chris Harvey.
“The Asian mentality a lot of the time is that buyers like a discount. If developers have a coronavirus price, then I expect many will sense a deal,” he says.
However, Harvey has not seen any uptick in wider investment activity. “What we have seen is clients dropping deposits and walking away from deals,” he says. “It is very early days, we just don’t know how it is going to play out.”
As China, Hong Kong and Singapore eventually come out of lockdown, government measures will be critical in encouraging inward investment to the UK. For now, a stay of execution on the proposed 1% foreign buyer surcharge will help attract buyers facing increasingly cheaper options in their own markets.
“Buyers might see that their home patch is cheaper now and rather play in their own back garden than invest overseas. Alternatively, some may be poorer now, because what they did own has gone down in value,” says Harvey.
In an effort to reactivate the sales market, the RICS has called for a “stamp duty holiday”, which could support local and international buyers, making new purchases more attractive.
In the longer-term, a rebound in sales is undeniable. The UK is still attractive and those sales will pick-up, the agents unanimously agree. The question is when, and all eyes will be on China and the wider continent in the interim.
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