Why the UK Property Market is set to withstand a second lockdown
Last week, Prime Minister Boris Johnson announced a second country-wide lockdown in an attempt to derail the stark rise in coronavirus cases projected this coming winter. This means that from Thursday 5th of November, imposing measures will include the closure of non-essential retail, hospitality, and leisure facilities, as well as stricter social distancing guidelines. People have also been instructed to avoid unnecessary travel, and work from home when possible in order to calm the second wave of Covid-19 cases.
Will the UK Property Market continue to operate during lockdown?
This has been a recurring question from many of Elavace’s property investors and rightly so. After all, the impossible became possible earlier this year when the soaring property market came to a grinding halt in the midst of the first lockdown back in March. This closure spanned across the entire market with many building sites closing for a short period of time, along with estate agents, conveyancers and removal firms also ceasing operations.
There are no plans of any such closure to the UK property market this time around. When the government first “unlocked” the sector by allowing agents and other entities back in offices from May, nobody could have foreseen what would be waiting ahead of their return. Remarkably, the housing market has jumped from strength to strength since its reopening and market activity has reached record highs since the summer. In order to continue these unbridled levels of growth, there have been massive technological advancements to remove all the bumps in the road to a second lockdown.
Estate agents and letting agents have continued their “business as usual” approach, all the while adhering to all Covid safety guidelines. Most are now conducting extensive virtual viewings so that buyers and sellers are able to progress with their plans. As far as housing developments are concerned, constructions sites are also set to remain completely open. Most building sites have successfully managed to adhere to social distancing guidelines for many months now which means that once again, business will continue as usual!
Developers have been implored by Housing Secretary Robert Jenrick who has recently reaffirmed the governments strong focus on its target of 300,000 new homes every year. Fantastic news for off-plan property investors, as this includes plans to promote more building in the Northern Powerhouse and Midlands region, rather than London, he says. This might be why the latest Knight Frank survey of 40 leading property investors signalled even greater growth in investment grade and purpose-built rented accommodation (PRS). At least 70% of respondents are confident that residential investment sectors will outperform ALL other real estate sectors over the next five years!
Kate Davies, executive director of the Intermediary Mortgage Lenders Association (IMLA), has added: “While the country faces a second national lockdown, the government has rightly decided to keep Britain’s housing market open.” Davies suggests this statement of intent is underpinned by "lenders, advisers, surveyors, and conveyancers already experiencing unprecedented levels of demand from consumers eager to take advantage of the government’s stamp duty holiday, which is due to end on 31 March 2021, and also the Help to Buy scheme, which will be available only to first-time buyers from1 April 2021.”
How much of an impact has Covid-19 had on the UK Property Market so far?
In the aftermath of the first lockdown, the government announced a raft of support measures for the housing market and ultimately, the recovery of the UK economy. This included new policies such as a break in stamp duty and other taxes to provide homebuyers with increased buyer power. Tracing back to July, when Chancellor of Exchequer Rishi Sunak declared that homes worth £500,000 or less would be exempt from the tax until 31st March 2021.While the 3% surcharge still applies to additional homes, this is still a huge saving for landlords.
As a result of this, the UK has witnessed unprecedented demand right across its housing market. So much so, the latest report from Zoopla has revealed that there are currently 140,000 more sales in the pipeline than usual for this time of year – a staggering 50% higher than 2019! Zoopla concluded: "The stamp duty deadline will focus the minds of committed movers in the near-term and make for a strong first quarter of sales completions in 2021.” In addition to this, another report from Zoopla listed the Northern Powerhouse giant, Liverpool with one of the strongest housing markets in the UK. This comes as demand rose by 3.4% in the year to the end of September placing the illustrious city in perfect steed for strong house price growth.
Another significant draw for UK property investors are the mouth-wateringly low mortgage rates which have been available on top of the stamp duty holiday. Naturally, this goes hand-in-hand with extremely low savings rates which has helped champion real estate as one of the most popular investment classes right now. According to data released by the Bank of England, the strength of the housing market has led to UK mortgage approvals in September to soar to their highest levels since 2007. Be that as it may, it’s important to note that this bewildering upswing in the market is partially the result of pent-up demand during the lockdown when the housing market was on hold.
The final catalyst to the flourishing housing market is the lifestyle changes and work-life balance adjustments struck by homeowners and renters, alike. Following the first lockdown, thousands of businesses closed their office doors for the last time to continue operations from their ‘comfort’ of their own homes. City-bound workers have started to reassess their priorities and sought more facilitated living arrangements available at a fraction of the price. New research from the Guild of Property Professionals shows that having somewhere to work at home is now a top priority to 21% of people. Other key priorities include high speed internet, large communal spaces, and built-in leisure facilities.
This is why build-to-let properties could offer great opportunities for investors. Because unlike traditional buy-to-let, these properties are purpose-build specifically for the rental market. And in light of the recent shift in housing needs, the additional amenities the sector offers will be particularly appealing for renters with changing lifestyles. Richard Donnell, Head of Research and Insights at Zoopla, said: “We’ve already seen how lockdown led to people carrying out a once-in-a-lifetime re-evaluation of their homes and lifestyles, with a focus on prioritising space. And the latest restrictions will continue to support this trend – particularly for those who are more financially secure.”
Mortgage consultant at Private Finance, Chris Sykes has offered his insight into what affect a second lockdown is likely to have on buyer demand. Explaining: “Ultimately, this is likely to entrench the current trends for those looking to move to houses with more space, both outdoors and to work remotely, and means areas outside major cities are likely to see higher demand than pre-Covid.” With that in mind, if you are property investor with any properties on the outskirts of a big city such as Liverpool, like Bootle or Flintshire, you are in very strong position to gain even greater yields than ever before.