UK’s property market has seen a mini-boom since it reopened in May. More and more people in London are becoming interested in purchasing detached houses instead of flats. According to the BBC, coronavirus contributed to the mini-boom in the UK’s housing market.
David Fell, a senior analyst at Hamptons International, believes that people are buying houses because they need more space in case there are more lockdowns in the future. While some experts believe that an increase in unemployment levels will bring an end to this boom by next year, others foresee the market bouncing back due to vaccine availability.
The Good
On December 8, 2020, 90 years old Margaret Keenan became the first person to be vaccinated against COVID-19. Britain’s government has acquired 800,00 doses of the vaccine. People have become hopeful that the world is finally on the path to recovery. Once people are vaccinated and lockdowns are lifted, the UK will hopefully be on its way to recovering from the economic recession caused by the coronavirus.
A portion of property investors remained unaffected by COVID-19 restrictions. Wealthy people who benefitted from the pandemic have no qualms about COVID-19’s effect on the housing market. Chestertons, a company that sells homes in prime central London sold a three-bedroom apartment in Mayfair for £4.65 million to a Hong Kong-based buyer. The buyer thought the price was cheap compared to when he tried to buy it in 2019 when the price was £5.95 million.
There is also a dearth of international buyers in central London right now, which is why buyers in the UK currently don’t have a lot of competition. Although there are people outside of the UK who want to purchase properties in London, current travel restrictions limit their options. As a result, prices of prime properties in London have decreased because of the lack of international buyers. UK residents with money to spare see this is a golden opportunity to acquire new property.
With news of vaccine rollouts and big construction projects attracting investor interest, property values in the UK could quickly recover once the pandemic ends.
The Bad
According to the Royal Institution of Chartered Surveyors, buyers are taking advantage of temporary stamp duty holidays. The stamp duty tax break will help buyers save around £15,000. RICS reported that sales of houses have been increasing. Buyers have been trying to purchase houses before the stamp duty deadline. Simon Rubinsohn, RICS chief economist, says that sales might start to slow down once the tax break ends. Demand will decrease and unemployment levels might rise in the first quarter of 2021 and these two factors, along with Brexit, will contribute to a slowdown.
In January, 2019, it usually took sellers 77 days to sell their houses. In November, 2020, Rightmove reported that it took about 49 days.
According to the Office for Budget Responsibility (OBR), house prices are expected to decrease next year. In 2022, however, they’re expected to increase by 9.6%. OBR predicts that it’ll take the economy at least two years to recover from the damage it took during the pandemic. The Centre for Economics and Business Research said that house prices might decrease by 14% in 2021. Another prediction by Hamptons International confirms that house prices will decrease in 2021. Aneisha Beveridge, head of research at Hamptons International, says the effects of COVID-19 won’t be felt until 2021.
Silver Lining
These are extraordinary times and even experts are left feeling perplexed and bewildered when they try to understand the effects of COVID-19.
Most predictions that have been made about the future of house prices in the UK aren’t too bleak, but it’s probably too early to say anything. Unemployment levels, wage levels, availability of vaccination, and lifting of lockdowns are only some of the factors that can influence the market. On whether property market crashes or soars, the reality maybe somewhere in between.
