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The property market: the highs, the lows and what we’ve learnt from 2020

by Nikki Dale -

In an unprecedented year, it was an unknowingly bold move to make predictions at the beginning of 2020 on how the property investment market would fare by the end of the year.

We were arguably sceptical entering 2020, in the wake of the election and with ‘Brexit’ still needing to be ‘done’.  There was an air of extra cautiousness in the stock market and noise over Cryptocurrency volatility and its halving in May. Property predictions were varied, but if house prices increased between 1 – 3% – this would be considered a win.

The pessimist’s pandemic property outlook

In Q1 2020 little did we fathom or believe that by Q2 the UK would be in its first national lockdown due to a global pandemic.  This led to the property market and building sites closing for nearly 2-months.

As the UK headed for an inevitable recession many predictions for the remainder of 2020 were largely pessimistic, with many experts projecting double-digit percentage declines in house prices by the year end.

Re-opening with a bang

When the property market re-opened in May, pent-up demand overwhelmed the sector, there wasn’t anything directly affecting property transaction, you could still transact, do viewings, etc..

Early on the government surprised us all with the Stamp Duty Holiday, a great incentive that spiked even more movement in the sector.  In terms of big SDLT savings this benefitted the primary residence house-buyers mainly, but even buy to let investors could save 000’s if not 0000’s.

Pandemic property problems of 2020

While post lockdown #1 was an exciting time there were definitely some pandemic related bumps in the road.

Slow Transactions

A general but more manageable problem was most transactions took longer than normal to go through in 2020.  There were issues with: mortgages, solicitors reducing manpower due to furlough, or backlog on searches.  The overwhelming demand during a pandemic definitely slowed the whole conveyancing process down.

Mortgages and first-time buyers

It was reported 7 in 10 first-time buyers were priced out the market due to mortgage lenders steadily withdrawing high loan-to-value loans in reaction to the coronavirus pandemic.

For those who had prepared to buy their first home in 2020, it was a frustrating year.  It was reported 62% of buyers had to delay their plans.   First-time buyers normally make up majority of purchasers in the market, but this fell last year for the first time in many years.

First-time-buyer products have massively reduced, and the amount of capital first-time buyers need has increased, or the amount they need to be earning has increased.

Problems with down-valuations, particularly with re-mortgages, were also seen through the last two quarters of 2020, where many surveyors were nervous to keep valuations in line with property prices.

Undoubtingly these reactions were a combination of safeguarding against economic uncertainty and coping with increased demand.

Less properties were built in 2020

Building sites were shut down in the first UK lockdown, and even when re-open the safety measures enforced slowed down the progress of bringing housing projects to fruition. Home builder Barrett’s built 5,252 fewer homes than the previous year (-29%)

What was pledged middle of 2020 by Prime Minister Boris Johnson was to “build, build, build” as the government unveiled new economic measures to accelerate building in the UK.

He conceded that the UK had “failed to build enough homes”.  To address this, the government has announced a £12 billion affordable homes programme, which will provide up to 180,000 homes over eight years.

The PM said he’ll also introduce the “most radical reforms” of the planning system since the end of the Second World War. This, the Prime Minister says, will help to get more young people get on the housing ladder.

These included:

  • Builders will no longer need a normal planning application to demolish and rebuild vacant residential and commercial buildings if they are rebuilt as homes.
  • Property owners will be able to build additional space/storeys to their properties, without full planning permission – complying with building regulations applies, along with the impact on neighbours.

The UK embraced working from home

Many people were asked to work from home by their employers because of COVID-19 safety protocols.

This had positive effects on the buying and rental market during 2020.

WFH era has seen a shift on where people live and what they require from a home.  Priorities have now become: more space in general, a dedicated space for an office, high-speed internet, outdoor garden spaces, and a home near to parks and green spaces.

By November 2020, research* said in the UK, 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 after COVID-19, equating to 16% fewer workers in the office on a typical day than before the pandemic.

This looks like a trend that will shape real estate going into 2021.

UK’s interest rate to 0.1% and talks of a negative interest rate

The Bank of England made two emergency interest rate cuts to try and reduce the economic impact of the coronavirus outbreak, this resulted in a 0.1% interest rate, the lowest on record.

Normally what happens when we see inflation falling, the Bank of England, to try and increase inflation cuts interest rates.

It was reported in Q4 2020, the Bank of England wrote to banks asking them to provide details on how they would cope if interest rates were cut to zero or even turned negative.

Now Brexit has happened it will be interesting to see when interest rates go up or be cut.

Autumn Budget Cancellation, good news for property investors & landlords

For property investors, the cancellation of the Autumn Budget was only good news.

Over the last few years, the announcements of new legislation for property investors, has not been good.

So, what bad news has the Autumn Budget cancellation deferred for the property investment market?

Firstly, Capital Gain Tax was reported to rise, this was to help pay for all the economic measures brought about by the pandemic.

Secondly was the introduction of the Renters’ Reform Bill, this proposal would scrap the Section 21.  In short, the Renters’ Reform Bill will make a landlords job much harder with a problem tenant.

Property house prices rocked the UK in 2020

The best news to end the year on.

UK house prices revealed by Nationwide’s house price index increased by an unexpected 7.3%.

Nationwide’s, chief economist, Robert Gardner says: “The resilience seen in recent quarters seemed unlikely at the start of the pandemic. Indeed, housing market activity almost ground to a complete halt during the first lockdown as the wider economy shrank by an unprecedented 26%. But, since then, housing demand has been buoyed by a raft of policy measures and changing preferences in the wake of the pandemic.”

2020 Summary

A year most people were glad to see behind them. The global pandemic has affected many aspects of our daily lives.

The property market has really had its ups and downs, which have either helped or tested home buyers, landlords and property investors.   

But after a roller coaster year the property market has finished on an absolute high, showing once again true resilience in tough times.

The challenges COVID-19 brought, in terms of just getting transactions through, lenders having reduced capacity and solicitors adapting to working from home, but UK property remained a popular investment choice throughout.

2020 fundamentally shifted behaviours and focus that will impact real estate throughout 2021 – but no doubt only in a positive way.


*YouGov, Barclays Research

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