It’s been an interesting start to 2021, seeing in the new year in another lockdown – the third and final we all hope!
Even though many industries are unfortunately shutdown again, the country is stuck at home, working from home or home schooling – it feels different this time – there’s light at the end of the tunnel with the roll-out of the COVID-19 vaccination program, giving the nation hope we’ll resume pre-pandemic normality at some point this year.
For the property market though, this lockdown hasn’t changed anything, strict safety protocols are in place and must be adhered to, but people can do viewings, they can move, gain access for maintenance, etc.
Moreover, many of the aspects that caused problems on the conveyance side in 2020 have been overcome, as everyone is now properly set-up and used to working from home.
What’s the property latest in January 2021
Firstly, lets review what’s new and happened in the first month of 2021 … blimey, the year has started fast.
The ups and downs, well mainly downs, for mortgages are calming and hopefully as the year continues and things start normalising, lenders will gradually reintroduce many of the products they removed in response to the economic uncertainty caused by the pandemic.
Positively, RICS (who regulates people that value property for lenders) have ruled out re-introducing a Material Valuation Uncertainty clause, which was introduced last year as we entered the first lockdown, which basically meant in lay-terms – everything is too weird now, so you can’t really rely on this – which was really unhelpful for lenders who did rely it.
It was then removed in September 2020, when they considered the market was stable enough. Concerns rose for the third lockdown but RICS has said there is ‘an observable enough market’ – so great news for lenders, buyers and the property market.
Will there be an SDLT extension?
We are all hoping the government extends the Stamp Duty Holiday. The e-petition ‘Extend the Stamp Duty Holiday for an additional 6 months after 31st March 2021’ had received the 113,000 signatures (19.01.2021) 13,000 over the required number for a debate in Parliament.
Research by Enness Global revealed 48% of current buyers are worried that their sale wouldn’t complete in time due to delays and subsequent backlog. And Rightmove said on Monday 18th January that around 100,000 sales currently in motion are likely to miss out on the saving.
Government reform around leasehold
The government had said they were looking to do something around leasehold, and ground rent in particular. In the next session of parliament new legislation will be brought in. Housing Secretary Robert Jenrick announced on 7th January 2021 that millions of leaseholders will be given the right to extend their lease by a maximum term of 990 years at zero ground rent.
Previously, flats were mostly 125 years, but now with 990 years its effectively freehold.
The government is also now establishing a Commonhold Council – Commonhold is a tenure not used often – however the government want it used a lot more from this year.
House price predictions for 2021
It’s a really mixed bag of nervous house price predictions for 2021.
Rightmove, is the most optimistic forecaster with a 4% rise.
RightMove’s Tim Bannister said “2021 has a lot of variables, and so is not an easy one to call, but with Rightmove’s unique leading indicators of buyer and seller behaviour we are confident that the housing market will continue to outperform general expectations next year as it did this. Our 2021 forecast of a 4% price rise is more conservative than the unsustainable 6.6% national average seen this year.
House prices rose to a six-year high according to Nationwide building society, rising 7.3% by the end of 2020. But many expect the market to slow over the next few months. The Centre for Economics and Business Research warns the property prices could slump by 13.8%.
Halifax predicts there will likely be a slowdown when the stamp duty holiday ends and anticipated unemployment rises with the governments removal of the furlough scheme and is expecting a fall of between 2% and 5%, while the Office for Budget Responsibility, the Treasury’s independent forecaster is more pessimistic, predicting an 8% fall in prices in 2021.
That said, researchers at Savills are expecting the market will be flat across all parts of the UK next year before accelerating again in 2022.
We’ll see as no-one got it right last year, all we can hope is that if Q1 doesn’t see a Stamp Duty Holiday extension, the government adds another form of stimulus to the property market.
Pent-up demand from overseas buyers
Demand from overseas supported the house price increases in 2020 and now in early 2021, especially inner London demand boosted by overseas investors seeking to buy before higher taxes for non-UK residents kick in.
The government announced that from 1 April 2021, overseas buyers will have to pay a 2% surcharge on their SDLT bill when buying residential property in the UK. This surcharge has been introduced supposedly to pay for more affordable housing for people living in the UK.
That said UK property remained a popular investment choice for overseas buyers in 2020 and 2021 should still attract investment with a seen increased interest from foreign buyers unable to travel. Once the travel restrictions are lifted pent-up demand from overseas investors allows them to view properties as planned.
A UK staycation boom is predicted once lockdown lifts
We saw a boom between the lockdowns in 2020 and this trend will be one to capitalise on in 2021.
Low capacity means higher prices on holidaying abroad, which is what all the travel companies need to dig themselves out of a huge financial hole. This along with timing of, how quickly the vaccine will roll-out, when will the travel restrictions lift and when will facemasks not be needed, all leans towards a staycation boom year for the UK.
Real estate, trends and investments beyond the pandemic
There were real estate shifts on the horizon. And what the pandemic has done is fast-tracked some of these existing trends, as well as creating some of its own. A notable two is the shift from physical to online retail and working from home. The pandemic has affected many aspects of our daily lives but when life returns to normal a number of these shift and trends are here to stay – or at least a watered-down version of them.
Coined ‘pandemic destination towns’. Smaller towns outside of London for example, nearer to the coast or rural areas will certainly see increased demand. This is likely to exacerbate occupancy rate challenges in Greater London and raise prices in these towns.
And it’s not just moving to the suburbs, it is the increased demand for, additional space for the family, a dedicated work area/office and a garden.
Employers and employees have got used to working from home and 60% of employers are planning to encourage employees to work from home more often. The average employee expects to work from home 1.25 days a week post-COVID-19, equating to 16% fewer workers in the office on a typical day than before the pandemic.
Commercial Landlords get ready
With this decrease of employees in the office, commercial landlords will need to consider being flexible in 2021. There will be less demand for office space, so, co-working flexibility and shorter more flexible leases/contracts will be expected, along with digital touch-free technology.
In the UK, physical retailers have been losing foot traffic for years as e-commerce takes an increasing share of sales. COVID-19 has sharply accelerated this trend.
Warehousing to support e-commerce continues to be the bright spot in retail real estate and will likely accelerate in the aftermath of the pandemic.