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End of Lockdown Signals New Start For UK Property

In February, UK Prime Minister Boris Johnson announced the government’s four-stage roadmap out of COVID-19 restrictions. Housing experts are predicting that this also signalled the start of a new era for UK property.

Summary:

  • April 2021 has seen UK life start to get back to ‘normality’, with outdoor dining, non-essential shops, pubs and the beauty industry reopening, and even staycations allowed again.
  • Initial figures from across the housing industry indicate that UK property is reacting strongly to the ease of restrictions, with a ‘post COVID-19’ boom on the horizon.
  • Housing experts and professionals are predicting that the COVID-19 pandemic has changed the way we live, and how we see our homes, forever.

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Confidence in the market

Since COVID-19 became part of the lives of millions of people across the world, the UK government has always made it clear how important the country’s housing market is to the wider economy.

The housing market was re-opened earlier than many others around the globe and the government initiated extra support such as the Stamp Duty Land Tax (SDLT) that was introduced in July 2020 and extended in March 2021.

Looking at the recent data, this support appears to have made a huge difference to the UK housing market, confidence amongst professionals is high with the continued growth:

  • The latest house price index from Halifax shows that property prices increased by 1.1% between February and March 2021 and they are also now 6.5% higher than in March 2020.
  • Recent data from the Office of National Statistics demonstrates that the UK economy returned to growth in February, with output rising by 0.4%. Construction was the highest growth area (rising by 1.6%), providing further support to the UK housing market.
  • The latest economy and property market update from the Royal Institute of Chartered Surveyors (RICS) suggests that property activity is set to increase as lockdown restrictions are lifted. Specifically, their data is showing that tenant demand is remaining firm, with rents projected to rise by around 2.5% nationally over a 12-month time period.
  • Homebuyers and Investors are flocking to property portals, with Rightmove showing record days of activity in March and April. On Wednesday, 7th April more than 9.3 million people visited the property portal.

Employment figures are also thought to be a key indicator of the future strength of property market. Unemployment figures fell in March 2021 and the hope is that as businesses re-open, these figures will fall even further.

Read about the UK Housing Market via our Specialist Residential & Buy to Let Division

Low interest rates are also allowing mortgage borrowing to continue and the fears of an immediate economic shock caused by Brexit appear to be unfounded.

Confidence in the UK in general appears to have been bolstered by the government’s successful roll-out of the vaccination programme and people are optimistic that the country is hopefully on an ‘irreversible path’ out of lockdown. This allows people to more assuredly turn their attentions to matters such as buying houses and making investments.

Overseas investment

Overseas sentiment in the UK market seems to be following the trend of domestic confidence. According to data from estate agent ludlowthompson, the number of as landlords owning property in the UK has reached a five-year high. The number is currently at 184,000 which represents a 19% rise over the past five years.

While there are forthcoming implications from impending tax changes in the buy-to-let sector for overseas buyers, what the COVID-19 pandemic and Brexit show us is that the UK property market is robust enough to attract overseas investment even in the face of adversity.

Future of UK housing market

Many housing experts are forecasting that the market will be changed forever due to the effects of the COVID-19 pandemic. Working-from-home is no longer a perk given by a few choice employers but is being seen as a ‘normal’ way of working that will continue to be a big feature of our lives.

This is having a big effect on how people see their homes and how they need them to function. Many are now desiring bigger living spaces so that they can have a dedicated ‘working-from-home’ area, and the need for outside space in the form of a garden or balcony is also likely to have major implications on the UK residential scene.

While there are many external factors that can be influential on the UK housing market, the reality is that it is a sector that will always bounce-back after a dip. With current house prices growing, demand remaining strong, and the UK government seemingly determined to ensure its strength, the future of the UK housing market is looking bright indeed.

Source: Select Property

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Why UK property will endure COVID-19 better than most

The UK Government’s implementation of strict social distancing laws in a bid to contain COVID-19 have been affecting the ways that businesses are able to operate, and how consumers are able to manage their finances.

At the moment, the government is providing the financial stimulus necessary to ensure the private sector is able to overcome the initial challenges posed by COVID-19 and the associated lockdown measures.

The direct and indirect impact of COVID-19 has affected the performance of different sectors and financial markets in different ways. The world’s major indices have suffered considerable losses – recently, it was reported that The Dow Jones Industrial Average crashed by almost 32%.

Other financial assets have so far proven resilient, such as UK real estate. I explore the reasons why this has been the case and what recent statistics tell us about property’s projected performance below.

The ‘Boris bounce’

House prices are typically used as an indicator of capital growth for real estate. In 2019, the political deadlock over Brexit resulted in significant market uncertainty and modest house price growth.

Some commentators feared house prices would drop significantly as a consequence of Brexit – however unlikely such events actually were.

Boris Johnson’s victory in the 2020 General Election and his subsequent ability to pass the EU Withdrawal Bill through parliament resulted in surging investor interest in residential real estate. House Price Indexes for March 2020 provided evidence to this affect.

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Both Halifax and Nationwide recorded that average residential property prices that month were 3% higher than they were the year prior.

With Brexit uncertainty forgotten, sellers were again eager to place their properties on the market. Coupled with the government’s growing excitement about ushering their new ‘housebuilding revolution’, it seemed that the UK was finally ready to confront the ongoing housing crisis and match the growing demand for housing with the adequate level of supply; generating strong increases market activity and a return of strong value returns all-round.

COVID-19 has put a pause on transactions

Lockdown measures imposed by the government in a bid to contain the COVID-19 outbreak has had a significant impact on the real estate market.

For the moment, the government is actively discouraging people from buying and selling properties, and some lenders have reacted to this news by deciding not to take on new enquiries.

However, I believe the momentum around the post-‘Boris Bounce’-market has not disappeared. In fact, in lieu of transactions being available, pent-up demand is likely to further exacerbate market activity once the pandemic is over.

Global realtor Savills, in November 2018, forecasted that the average UK property’s value would increase 15% by 2024 – assuming a majority government is elected and a Brexit deal is agreed.

Although both of these events occurred, COVID-19’s economic disruption could have been a new impetus for Savills to revise this figure. However, Savills is confident that long-term demand for UK real estate will drive prices higher, resulting in them not changing their original projection.

Short-term forecasts were revised to take into account significantly the decreased transactions levels expected for the next two months or so, but the long-term predictions for growth weren’t altered.

Ultimately, it can be said that COVID-19 has, in a sense, taken the place of Brexit uncertainty in artificially supressing market activity and, thus, property price growth.

It is also worth mentioning that COVID-19 is a public health crisis, not an economic one. This means that once the virus is contained there is no reason to suggest why the property market will not make a quick recovery.

That’s why I am confident we will see a surge in activity once lockdown measures are lifted and the virus outbreak has been effectively resolved.

By Jamie Johnson

Source: Mortgage Introducer