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How Has the UK Property Market Performed Since COVID-19?

With Brexit, a Cabinet reshuffle and COVID-19 in the mix, the UK has gone through a seismic series of unfortunate events that would make Lemony Snickett proud. We take a quick look at how the UK property market has performed based on latest released figures and the market outlook in the near term. 

In March, the UK went on a national lockdown, joining many other countries around the world in an effort to stem the spread of COVID-19. 

As expected, the UK property market went into a state of suspended animation. Whilst there were no drastic price plunges like the stock market, Zoopla reported a 70% decline in demand for housing in March as viewings paused and uncertainty affected household decisions. Physical restrictions also saw a reduction in the number of sales coming into the market. 

UK Property Price Performance Due to Lockdown 

Fast forward 50 days to the reopening of the property market in May: Zoopla recorded an 88% spike in housing demand. Low supply, on top of the ongoing critical housing shortage in the UK, had exerted pressure and caused a spike in house prices. 

The market continued its rebound in June 2020, boosted by the imbalance in supply and demand resulting from the lockdown, as well as the introduction of the stamp duty holiday. 

The UK government recently announced a break in stamp duties for properties up to £500,000, resulting in savings of up to £15,000 on the tax bill for property investors. Read more here: https://bit.ly/SaveGBP15K

By July, the UK property market recorded the “highest house prices ever” at a growth of 3.8% compared to 2019, according to the Halifax House Price Index. 

Prices of UK property grew for the first time in 4 months, thanks to pent up demand and also the stamp duty holiday. Source: Halifax; image credit: The Sun
Prices of UK property grew for the first time in 4 months, thanks to pent up demand and also the stamp duty holiday. Source: Halifax; image credit: The Sun

Between 8 July and 8 August, there was a 38% increase in the number of people registering to buy properties costing up to £500,000 across the UK compared to last year, based on an analysis of data from more than Countrywide’s 700 branches UK-wide. These properties were selling for at least 96.5% of their asking price and upwards.

UK Property Outlook: Rosy or Bleak? 

Like the rest of the world, the UK’s GDP has been impacted by COVID-19. The ONS recorded two quarters of GDP falls, putting the UK officially in a recession. House prices typically fall during a recession, usually after a period of strong growth, however this time around, house prices have seen modest growth over recent years. 

House Price Growth

Current data shows that 16 out of 20 cities have recorded house price growth of 2% and more, with Manchester leading the way at average price increases of over 4% per annum. London has also been charting stronger gains after a season of flat growth. Naturally, government support has been important in supporting business and consumer confidence, but the full impact of pandemic and potential labour issues remain to be seen. 

Nonetheless, Savills is standing by its 5-year prediction, which forecasts an average price growth for the UK at 15% from 2020 – 2024. The Northwest, where cities like Manchester and Liverpool are located, is expected to see the highest growth at 24%. 

The UK is forecast to see price growth in the next 5 years, led by cities in the Northwest. Source & image credit: Savills Research, June 2020.
The UK is forecast to see price growth in the next 5 years, led by cities in the Northwest. Source & image credit: Savills Research, June 2020.
Housing Undersupply & Its Impact on the Market 

House price growth has been underpinned by a housing shortage that has plagued the UK for decades.This imbalance is unlikely to be addressed even within the next 10 years. The shortage will continue to snowball as the population is expected to swell to 73  million in the next 20 years, further increasing the potential demand for housing. This will continue to prop the housing market for years to come. 

Rental Property As A Preference 

Research shows that rental property has become more popular and UK renters will outnumber homeowners by 2039, driven by increasing house prices and the flexibility of renting. Read more about Generation Rent here: http://bit.ly/GenRentUK

UK rental prices have steadily increased from Jan 2015 to 2019. Source & image credit: ONS Index of Private Housing Rental Prices
UK rental prices have steadily increased from Jan 2015 to 2019. Source & image credit: ONS Index of Private Housing Rental Prices.

Meanwhile, rental prices have shown a steady increase since Jan 2015, according to the ONS.

Verdict: Yay or Nay? 

The lockdown has impacted supply and demand, and suppressed the housing market. Yet, the appeal of UK property has not waned among foreign buyers who are also looking to take advantage of the stamp duty holiday which ends in April 2021. 

Mortgage searches by advisers around non-UK residents has seen a significant rise in recent months. According to data from the Legal & General Mortgage Club, 1 in every 22 residential searches was for a query relating to an applicant currently on a visa or an expat not based in the UK. Mortgage searches made by advisers for ‘expats not in the UK’ featured in the top 10, with ‘expat not in the UK’ and ‘foreign income’ appearing in the top 5. 

With the currency still at affordable rates, and the stamp duty holiday, investors have great opportunity for more savings and higher returns. The Bank of England’s base rate remains at a historic low of 0.1%, leading to more competitive mortgage rates. 

Recent data shows that the UK remains a top choice for investors, with London ranked the #1 destination in Europe, and the #2 city in the world  to invest in property by the Schroders Global Cities Index (Jan 2020). 

By Vivienne Pal

Want to know more about investing in UK property? Join our upcoming webinar to find out more about how you can grow a property portfolio in the UK and increase your wealth even during times of uncertainty. Click here to register: http://bit.ly/2M-10M

Souces:

  • www.csiprop.com/additional-savings-up-to-15000-for-uk-property-investors/
  • https://www.theguardian.com/business/2020/aug/10/sunaks-stamp-duty-holiday-behind-surge-in-home-buyer-interest
  • https://www.savills.co.uk/research_articles/229130/301028-0
  • https://www.ons.gov.uk/peoplepopulationandcommunity/populationandmigration/populationestimates/articles/overviewoftheukpopulation/november2018
  • https://www.ons.gov.uk/economy/inflationandpriceindices/bulletins/indexofprivatehousingrentalprices/august2019
  • https://www.propertyinvestortoday.co.uk/breaking-news/2020/8/overseas-buyers-take-advantage-of-stamp-duty-holiday-before-2021-surcharge?source=newsticker
  • www.propertywire.com/news/stamp-duty-changes-spur-rise-in-interest-from-overseas-buyers/
  • https://www.schroders.com/en/schrodersglobalcities/blog/global-cities-index/

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