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COVID-19 and its Effects on the UK’s Property Market
COVID-19, and the worldwide lock down that ensued, effectively brought the economies of many of the worlds super-powers to a standstill. Governments around the globe have stepped in with unprecedented financial and social measures to help ease the heightened uncertainty over the economy, employment, finances, relationships, and of course, physical and mental health of their citizens. The UK property market has also been affected by COVID-19, but to what extent, going forwards, is still unclear. We can, however, make some important inferences from the response we have seen since certain measures have been alleviated.
On 14 May 2020, the UK government eased some of its stay-at-home measures in England, finally allowing the property market to restart its engines. The easing of these measures meant that estate agents were once again capable of conducting in-person property viewings, a great boost for the industry. In fact, Rightmove declared that on the day the market reopened traffic to its website returned to pre-lockdown levels, with 5.2 million visitors, a welcome development. However, there were only 11,000 properties listed for sale on Rightmove in the week following the reopening of the property market, down 65% on the same week last year. Zoopla, meanwhile, conducted a survey that found 41% of home movers had decided to put their moving plans on hold.
How will house prices be affected?
This is the million-pound question and one that key stakeholders within the industry are trying to understand. Unfortunately, it is too early to give definitive figures on how house prices will change but there is agreement amongst market leaders that there will certainly be a sharp drop in property prices in 2020 followed by a bounce back in 2021.
Knight Frank, with the most favourable figures, suggests that UK prices will fall by 3% in 2020, but quickly bounce back by 5% in 2021. This estimate is in keeping with its predictions around the economy shrinking this year.
Lloyds Banking Group (which includes Bank of Scotland and Halifax), in a thorough statement holds the assumption that prices will fall by up to 5% this year, before recovering by a smaller 2% in 2021.
Savills, on the other hand, has offered two quite different predictions depending on the severity of coronavirus and its overall economic effect on the UK. The first forecast, assuming the effects of coronavirus are not too long-lasting, predicts a 5% drop in house prices in 2020 with a 5% rise in 2021. Its second forecast, presuming coronavirus has deeper rooted consequences on the UK property market, predicts a 10% fall this year and a 4% rise in 2021.
Finally, Zoopla has announced that it expects that after an initial boost, buyers and sellers will ‘start to exert greater caution’ in the coming weeks. Furthermore, a fall in mortgage options, means that first-time buyers ‘may need to find more equity to put into purchases, or step back from the market’. This could, however, give buy to let landlords a much-needed boost in the rental market as first-time buyers look for rental options instead.
Positives for the property investment market?
Despite the varying housing market predictions mentioned earlier initial recovery figures have been somewhat surprising, with sales surging by 137 per cent since estate agents reopened for business on the 14th May.
Over 24,000 homes were sold across the UK in the last 7 days as the country eases its way out of the coronavirus lockdown. The pent-up demand has seen the average asking price rise by 6% in comparison to the same week in June of 2019, exactly one year ago. Of course, this pent-up demand will decrease, and property prices will start to follow the trends predicted by market experts in the previous section. Lucian Cook, Savills head of residential research, said: ‘Without doubt, pent-up demand accounts for some of the bounce in transaction numbers, but it also tells us that for those buyers with stable incomes who’ve been able to shield their finances through the lockdown, there is still a pretty strong resolve around moving’.
With property prices expected to decline sharply but recover quickly, it offers experienced and prospective property investors the perfect opportunity to pick up a buy to let property at a reduced price with an eye to the future. As mentioned earlier, with certain groups of buyers, particularly first-time buyers holding back with there first purchases, the rental market will be important in providing housing to many people.
At CityRise we believe the market will bounce back well and fully recovered by the end of 2021. As this happens house prices will begin to increase as they were doing before COVID-19, making the next few months a crucial period to invest before prices reach pre-COVID levels.
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