On 22nd February, Boris Johnson announced the nations ‘roadmap to recovery’, unveiling his 4-step approach to lifting the lockdown restrictions. A date can finally be put in the diary for when all Covid-19 restrictions can be lifted, something which feels foreign after a year of being ordered to ‘stay at home’.
However, throughout the successive lockdowns, the property market has remained resilient and this can be partly owed to the stamp duty holiday. The tax break influenced a significant influx of property transactions and stimulated a mini boom in the market, increasing buyer demand by 12.4% compared to the same time the previous year and led UK average house prices to grow annually by 8.5% – the highest growth increase since 2014.
This leads to the very welcoming news in the recent Spring Budget, where Chancellor Rishi Sunak announced the extension of the tax break holiday till the end of June. Rightmove revealed the volume of transactions could see up to 160,000 – saving thousands who are in the ‘completion trap’. With the holiday extension going ahead, the next few months are expected to be busy for both homebuyers and investors. This most welcome extension will boost activity through Spring into early Summer and highlights how integral the property landscape is in fuelling the wider economy.
A critical factor which has enabled Johnson to spread optimism to the nation was based largely on the resounding success of the vaccination rollout thus far. Currently, more than 20 million people have been given their first dose of the vaccine- producing a glimmer of hope and more importantly, ensuring a viable end to the pandemic. With a return to a sense of normality, we expect there will be an unleashing of further pent-up demand from movers and opportunists looking for their next investment opportunity. It also guarantees that even when the SDLT does come to an end, the effects will be less detrimental than earlier predicted and instead, merely cause a bump in the road with experts from Zoopla expecting the number of transactions to match the same as in 2020.
Alongside increasing consumer confidence, immunising the nation means the property market can fully get back to business. Luckily, technology has stepped in as a solution and enabled house viewings to carry on with business as usual – producing high quality video content and virtual tools for homebuyers and investors. However, whilst construction and building sites have remained open through lockdown 3.0, the national restriction guidelines have affected progress on site and in some cases, incurred additional costs – with variables such as delays in the supply chain and delays caused by local Covid-19 breakouts. When the vaccine has been fully rolled out, the property market will experience an acceleration in activity as a product of both increased market confidence and efficiency in operations.
Will people return to the city?
The answer to this question changes depending on who you ask. From a psychological perspective, age plays a significant role in shaping people’s priorities going forward into the post-Covid era. For older generations, the appeal of the big city life may be less attractive as the search for rural living continues. However, the appeal of a city life will return for many, especially among the younger generation who crave the fast-paced buzzing city life and rely on big cities for job prospects. Yet, what can resonate among all age demographics, is the recognition and value of getting more for your money – a mindset which has excelled amid the outbreak of the pandemic and has led to a mass exodus of London.
With regard to the trend of ‘working from home’, there is ongoing debate whether the trend is a short-term reaction to the pandemic or will evolve into a longer-term trend. Either way, it seems fair to suggest flexible working will be a very popular option for employees, consisting of both in-office and homeworking. This will encourage many to continue prioritising space in the home for work, as well as living in close proximity to the main office. Therefore, properties with additional space, such as a 2-bed or larger, located near city centres present lucrative opportunities for investors. Savills surveyed over 500 tenants and revealed location was the most important variable when searching for a new rental home, followed by more space in the home and accessibility to the countryside. With these changes in market behaviour, savvy investors in today’s climate, will be considering property size and location to achieve the most lucrative return on investment.
Location Location Location
To see long-term financial security from your property investment, the first essential step is to conduct location research. Historically, the capital dominated the rental market, however, other cities are now fuelling momentum in the market.
In recent years, the North of England has been described as the ‘up-and-coming’ areas for investment opportunities, however, now, these areas class as hotspot locations for investors, leading the market in rental yields and capital appreciation. For example, the North West saw the highest annual house price growth of 11.2%, compared to just 3.5% growth in the Capital. The ONS figures indicate the stark north-south divide in growth rates, also reflecting the increasing demand for housing up north. This presents the ample amount of investment opportunities in the North, whilst also boasting below average property prices in UK.
At Alesco, we have a diverse portfolio of developments in the UK’s Northern Powerhouse. Northern cities are being transformed beyond recognition, balancing the historic domination of the Capital in fuelling the UK’s economy. Seven years into the Northern Powerhouse initiative, and there has been resounding success in re-shaping the North of England. Cities including Liverpool, Manchester, Birmingham and Sheffield are flourishing with thriving local economies, business innovation, and a significant growth rate in population and employment levels.