The Future of Central London’s Housing Market Post COV19

By 2020-04-16 July 12th, 2020 Investment Advice

 

Business as we’ve known it has changed and will continue to do so, given the current crisis of COV19 that the entire world is facing. Perhaps however, it is not the question of what we do, but how we do it?

Here and now, COVID-19 has paralysed the conventional “practicality” of conducting business in the property market given the social distancing measures in place. However, when read through the lines we can see strong bouts of opportunity for stable and returning investments.

When I think about the longer term implications from the effect of COV19, the “new normal” and how long (if ever) it could take for working environments to return to the way it was before, a large chunk of the workforce will continue to adopt a work from home style culture. Less people would be comfortable going back to working in large open-plan offices, if the work style is conducive in avoiding this.

This will have massive long term implications to property markets around the world and most so in major cities. Developers and planner will be noticing these changes in working life style and will adapt to building more PRS to adjust to this demand, potentially altering a lot of the city’s landscape.

For example, large corporations in legal and finance will still have their main offices active in the major cities, but employees would not be expected to do the typical 9-5 workdays. Especially with the rate of development in online systems and customer service platforms. London’s residential market by nature will flourish as people would still want to be close to their place of work/office whilst having the vibrancy and convenience of city living. Just the same, the more rural areas of England would also benefit from this emerging style of working.

WFH is a trend that will continue to rise in London, boosting rental values in the residential market
  1. Restricted movements.

The Housing Minister has advised against home moving during this time. Official advice from the government on home moving has encouraged both parties of an occupied property to do what they can to amicably agree alternative dates of moving, to a time that is likely that stay-at-home measures would be lifted. For those of us who are concerned about shifting the terms of lease agreement dates, UK finance have confirmed that in order to support customers who have already exchanged contracts to extend their mortgage offer for up to three months to enable the move to be pushed to a later date. Lenders will work with customers to help manage their finances as a matter of urgency.

Recommendations from the Housing Minister have directly led to a reduced period of activity in both sales and construction. This could temporarily lead to a dip in housing prices. Buying and selling can continue during this period but there must be light given to the fact that this process may take longer than usual.

2. Political certainty

Greater political certainty following the large conservative majority from the election in December 2019 (which was largely considered a “Brexit Election”) saw London property prices rise 2% from Jan- Mid March this year according to Savills Research.

House prices rose at their quickest pace in 18 months in February with the London market in particular rebounding “at an astounding rate”. The charge being led by the Capital where buyers have flooded back since Boris Johnson’s election win. As of mid-March, Rightmove said sales agreed rose by 34.4% to reach their highest figure for this time of year since 2016, whilst house price growth was at its highest since May the same year. “It took fifteen days fewer for homes to sell once they’d been put on the market.” Notably, these price indexes are based on figures prior to Government escalation to their response of the Covid-19 from “contain” to “delay”.

3. Travel restrictions.

However, the market fundamentals are still there and there are optimistic opinions over the virus’ effect on the property market. Once this short term blip is out of the market the suppressed pent up demand that are building from both a buyers and rental perspective will splurge onto the market which will lead to a positive V shape growth pattern. “As an industry, we are yet to see the true impact of Covid-19 on the market. However, if fewer people choose to holiday abroad over summer, we could perhaps see an increase in activity in this traditionally shower period”, said Nick Leeming – Chairman of Jackson-Stops. Furthering from this point is that observing the current state of  the aviation industry, tourism worldwide is expected to be dramatically halted at least until next summer of 2021. Therefore, brits are expected to stay throughout the summer in the UK, and we can expect an increase of property investment once movement controlled orders are relaxed.

4. London’s proven resilience against uncertainty.

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In uncertain times like this the London Property market has proved time and time again its resilience and ability to bounce back much quicker than most asset classes which is why it is so popular for investors around the world. It is also not just safe but extremely profitable. According to Savills’ latest report amid the turbulence of the pandemic, the ONS released its house price index for the very first time showing us data from the last 25 years across England and Wales. It showed us that the London borough Hackneys property market has increased 850% over the last 25 years. At a time like this, where the society and globe as a whole is riddled with fear, panic and anxiety, it is even more vital to keep the bigger perspective in mind. Investors who can see past these short-term bumps in the road are far more likely to benefit from even larger returns, years from now.

Buying at a time like this could be recognised as higher risk when evaluating the current market conditions, however investors would be backing on an accelerated V Shape bounce back in prices and the continued growth that we saw in the market earlier this year.

5. A stronger currency.

The GBP has made significant gains against the USD over the past week and a half,  proving its resilience and ability to rebound quickly whilst other major currencies like the AUS Dollar and Yen have continued to weaken over the same period. As the world continues to collectively fight against the spread of this disease, the next few weeks will be vital in monitoring the currency valuation. Historically speaking, GBP is precariously weak against the USD and is a great opportunity for overseas landlords to buy.

We are to help guide our landlords and potential buyers through this period. Being the underwriter of our developments means that we have the autonomy to adjust price expectations to reflect the current market conditions. Investors should be tuned in at this point in time not be discouraged or fearful!

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Ref:

https://www.homesandproperty.co.uk/property-news/uk-house-prices-surge-london-property-market-brexit-drama-a137041.html

https://www.savills.co.uk/blog/article/298520/residential-property/25-years-of-house-price-growth-reveal-a-highly-localised-market.aspx

https://www.homesandproperty.co.uk/property-news/london-house-prices-coronavirus-stamp-duty-brexit-a137366.html

https://www.gov.uk/guidance/government-advice-on-home-moving-during-the-coronavirus-covid-19-outbreak

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