Can anyone even remember life before the evening of March 23rd? From then till now, life has been a whirlwind while we have adopted a temporary life from the indoors watching as the world restores itself through our television and phone screens or a mere glance through the window screen as our feathered companions take back what was once theirs.
Of-course, it is easy to lose grasp of how life is now and what life will be like in the future.However, we are here to tell you that at last, there appears to be a light at the end of this bleak and distorted tunnel.
Cast your mind back to the world before it drew to a standstill; particularly the vastly growing UK economy and the soaring property market at the stem of it. It is no secret that property investors had been licking their lips as more and more lucrative opportunities were becoming available in a sector which looked to show no sign of slowing.
The value of British homes grew at their fastest rate since as far back as February 2017 with house prices growing by 3.7% on an annual basis in April, according to Nationwide.
We at Elavace can support this trajectory having received a huge volume of interest from new investors looking for investment properties for sale, as well as further interest from trusted investors who stood at the summit of the most lucrative capital gains in the UK as house prices grew at a consecutive 0.7% per month at its strongest rate in 26 months!
Nationwide’s data goes on to tell us that the average UK home rose in value from £219,583 in March to a stunning £222,915 in April. Keep in mind that this data is based on mortgages approved in April but submitted earlier, which is why April data shows such significant growth despite the lockdown.
As you may have read from our previous articles regarding the substantial growth in the UK property market, much of this growth was due to the resurgence in confidence from the British public as the prospect of Brexit became clearer after the 2019 general election, coined the ‘Boris Boom’.“
Activity levels and price growth were edging up thanks to continued robust labour market conditions, low borrowing costs and a more stable political backdrop following the general election,” Robert Gardner, chief economist atNationwide, said.
You may be wondering, ‘How can I have faith in the UK economy after it was brought to such a grinding halt?’ We hear you, rest assured, the growing confidence from estate agents and housing experts in the property market to bounce back is not based off the wave of a magic ball.
As many experts will say, the confidence in the economy to return to the force it once was is all in trust of the government to implement the correct measures and policies accordingly. “Much will depend on the performance of the wider economy,” Gardner added.
A strong economy goes hand in hand with a strong property market. Thus a huge focus of the UK government is to preserve the property market by supporting businesses and individuals, with the first step from the banks to grant 1.6m mortgage holidays to worried homeowners.
Gardner pointed to measures including £330bn in business support and the government’s job retention scheme. He said these could keep borrowing down and allow UK house prices to bounce back. Claiming, “The raft of policies should set the stage for a rebound once the shock passes.”
He goes onto say, “These same measures should also help ensure the impact on the housing market will ultimately be much less than would normally be associated with an economic shock of this magnitude.”
Lucy Pendleton, founder of independent estate agents JamesPendleton, agreed with Gardner that this economic standstill is completely different to any other.
If you were to read the article published by Elavace as the lockdown began in March, we also identified the clear differences of this crisis to that of the Financial Crisis of 2008 which was completely self-inflicted forcing many people to sell their homes at a significantly lower market price.
Whereas, this downturn in the market has had the most profound effect on sellers who are actually holding out for previously agreed prices from buyers suddenly looking for coronavirus bargains, Pendleton claimed.
For this reason, she is filled with confidence that the strong growth rates in Nationwide’s findings prior to the pandemic could most definitely find its feet once again over the summer.
Adding that, “This market may be running on fumes right now. But the vast majority of the clients we are speaking to aren’t being panicked into lowering their prices.”
We can only compare todays events to other crisis’ in the past to take away how house prices have been impacted and how quickly they have responded to a stabilised economy.
The 2008 Financial Crisis had perhaps the most profound impact on the property market to date. According to data from theLand Registry Index, the average price of property in the UK dropped by 18%,with a fall from £189,193 in December 2007 to £154,452 by March 2009.
As well as this, transactional levels also dropped from 1.65 million to 730,000 fromJune 2008 to 2009. While these figures presented a bad outlook for the market as a whole, UK property prices began to recover quicker than expected.
ByAugust 2010, average property prices had risen to £173,417, and by mid-2014, had fully recovered to pre-crisis levels. These numbers speak volumes as to how quickly the current economy might respond once lockdown has been completely lifted and the UK returns back to normal.
Interestingly enough, Pendleton went on to draw an alternative comparison of this current market and the market during the years of uncertainty around Brexit. “The market is coiling itself up like a spring just like it did during the Brexit years.
This latest growth figure has to betaken with a big pinch of salt. [But it] was the result of all that pent-up energy being released.”
It may ring as music to investors’ ears that not only might the property market restore itself by summer-time, but Pendleton goes to make an exciting prediction that “this time we’ll be expecting just as big a post-lockdown leap in activity to make up for all the lost time.”
Gardner and Pendleton are not the only experts with rising confidence in the property market as the days tick on towards lockdown being lifted.
Iain McKenzie, CEO of The Guild of Property Professionals, considers the lockdown to be a short-term obstacle to UK house prices. “While transactions are being hit hard and will likely be impacted for the next few months, it will be temporary,” he said. “I predict the market will start to recover shortly after restrictions are lifted.”
McKenzie also added, “New vendor enquiries are starting to recover week by week. This points to the fact that people want to move but are currently unable to while the fight against coronavirus continues.”
What we can take from the claims of both McKenzie and Pendleton is that buyers and sellers alike have not and will not quiver despite the economic standstill, thus the only obvious impact on the property market is the timeframe to which transactions may be completed and the overall economic damage may very well be limited.
According to Zoopla, these assertions around transactions can be confirmed as figures show that COVID-19 has actually caused a significant drop in proper transactions between March and April of around 70%.
However, there has already been an increase in May of around 20% which is a clear indicator that we are through the worst of the uncertainty that we were faced with at the start of the pandemic.
Not only this, the latest Knight Frank property reports the reason for this is due to the relaxation of the current lockdown and with the recent decrease in property transactions expecting to stabilise towards the end of 2020 and the start of 2021.
Thus now may very well be the perfect time for cash investors to maximise on some of the potential opportunities available.