- April 23, 2020
The concept of supply and demand is not new. In fact, back in 1776, when Thomas Pritchard was still sketching the iron bridge that heralded the Industrial Revolution, Adam Smith was already attending book signings for ‘The Wealth of Nations’ which discusses it extensively. In the property market, we’re familiar with how the ups and downs of the economy impact prices and activity, and there’s plenty of speculation about the impact of Coronavirus crisis and what will happen.
However, what we expect to see happen in a market assumes ‘all things are equal’. We’re so familiar with how a recession impacts income and confidence, and how it in turn effects the housing market, that we fully expect the same to happen this time. But this time, there’s a difference. Right now it is still hidden, but something fundamental has changed that may well impact what happens next: Coronavirus may just have altered what we use our homes for.
Until recently, most of us would work at home occasionally or not at all. Our children would go to school to study. We would take for granted that we can travel to shops, for recreation or to visit elderly parents. We’ve therefore bought homes that fit the bill. You know the conversation:
“Another bedroom? It would be useful for when your brother visits, but it’s not as important as being near the station is it?”
“A garden? Be nice, but we can always drive to the park.”
“Close to your parents? It’s a bit of a trek, but they’re always off on cruises anyway.”
I wonder if these conversations may have just changed. Across the country, millions of us are spending more time at home than we ever have. We’re working at home, teaching our kids at home, playing in the garden more. We’re shopping for our parents and taking more walks. Our cars are standing idle. We haven’t taken a train in weeks. Suddenly, we’re looking at our homes in a new way, and we’re asking a lot more of them.
Of course, we all hope it will go ‘back to normal’ soon. But how soon? And what will the new ‘normal’ be? Will we all go to the office every day again? Will we stop ordering so much online? Will we feel comfortable with the parents living so far away? Along with many commentators who share my view that we are entering a Second Digital Age, I’m not so sure.
In the meantime, many of us are going to decide that we really do need that third bedroom, or that a decent garden matters more than being close to the station. For some, that won’t be possible: the economy and its effect on jobs is still going to be a significant factor. But for others, the world has changed, and so will what they want from their home. And that could mean significant new demand in the housing market of a sort that just wouldn’t normally follow an economic blow like Coronavirus.
Could this be a silver lining for the property market? It’s too early to call. But like Pritchard with his iron bridge, once people start to see a commodity in a new way, it’s a fair chance that the market for it is unlikely to stay the same.