However, last week brought extremely positive news as the decision was made to reopen the property market. We can now look to the post Covid-19 property landscape with confidence as we begin to gain a picture of what it will look like and how the market will bounce back.
Just 24 hours after the government announced that it was lifting the housing market lockdown, the number of visitors to Rightmove hit 5.2m; this figure marks a 4% increase above the same day last year. As online traffic returned to normal levels with prospective house buyers doubling overnight in the wake of the government’s decision, Savills also saw their web traffic bounce back to pre-coronavirus levels.
This proves the positive impact of both pent-up demand and the continuation of property transactions that were put on hold when COVID-19 forced the property market freeze. With an initial momentum that is extremely promising, we can expect to continue on this positive tract for the coming months as more and more buyers and sellers resume normal service.
It may take some time for the market to fully recover with predictions from Savills of between 5% and 10% fall in property prices dependent on how quickly the pandemic is contained and how efficiently the lockdown situation is managed. Knight Frank forecasts are stronger, predicting that prices will fall by 3% this year, but then bounce back by 5% in 2021 in line with overall economic activity.
While the impact on property prices varies among leading figures, the overall predictions are consistent in that this sharp economic impact is only expected to last for the short-term. Firstly, the fundamentals of our property market remain much more resilient than those during previous recessions. In addition, the market retains a good balance between seller supply and buyer demand which is working to minimise the effect on property values and prevent any serious long-term impact. This To this end, leading estate agents have forecast a “robust recovery by 2022 and a cumulative rise of around 15 per cent in five years.”
All major estate agents agree that house prices should rise again by 2022, while research shows that the vast majority of sales in process before lockdown are still in place. This good news is supported by the fact that the Bank of England base rate is at lowest ever (0.1%), improving affordability for buyers and underpinning both consumer confidence and buyer demand. The Bank of England is unlikely to lift interest rates from their current position until well into 2021, although house price gains will still be relatively slow.
In addition, the fear that house prices will fall further than 10% if a high number of people are forced to sell due to financial struggles seems to have been abated. In another boost for the market, experts predict that lenders may lower repayments in order to avoid the mass repossession of properties.
One thing we can expect to see is growing interest in property outside of the capital. The Northern Powerhouse had already proved its strength and popularity prior to lockdown, both in comparison to London and in its own right. Cities such as Manchester – the UK’s 2nd capital – offer an exceptional quality of life and good career prospects without the high price tag of living in London. With the HS2 high-speed rail project improving connectivity across the UK to both major cities and previously difficult-to-access areas, this has only enhanced interest outside of the capital.
In addition, the mood has changed since the pandemic hit and country homes and more rural areas are predicted to be more highly sought after. Lockdown has emphasised peoples’ desire for more space both inside and outside their homes, with many more people also expecting to work from home on a permanent basis and therefore seeking additional space to setup a home office.
Estate agents have already reported a large increase in enquiries and buyer registrations for “well-connected countryside and “out of city” locations”, and this demand for large country homes is likely to see an increase in property prices due to limited supply. We also anticipate an increase in demand for homes in all areas with large gardens or outside spaces such as balconies or terraces with an expected positive knock-on effect on property prices.
As the property market must still adhere to physical distancing rules, virtual and online viewings are the order of the day. Along these lines, we can expect off-plan property to be a key driver of sales and a prime factor in the market bounce back. When new homes are purchased off-plan, this means no requirement for physical viewing. With many builds often anticipated months in advance, this also ties nicely into those buyers seeking to plan for the long-term and set the wheels in motion to fulfil their property ambitions once the lockdown has fully lifted.
There are a number of additional key factors that will impact the market recovery and slow the speed of which it will bounce back, including the unemployment rate and the availability of low-cost mortgage finance. We should also wait and see how the government might respond to the evolving situation, as there have been suggestions of implementing further support measures and incentives such as tax breaks or subsidies to kickstart the market.
In the meantime and as the market can now safely move forward with no suggestion of any serious or long-standing drop in property prices, this is a prime time for first time buyers, investors and portfolio landlords seeking to take advantage of opportunities. For more details on property investment prospects including those in build to rent developments in prime locations, contact our team today.
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