Looking Ahead in 2020 – Reasons to be Confident in the Property Market
Looking Ahead in 2020 – Reasons to be Confident in the Property Market
As the housing market reopened in England in the middle of May, and lockdown restrictions begin to relax at the beginning of June, all elements of the housing industry are ready to hit the ground running and return to the post-COVID heights of early 2020.
After a complete shutdown and a degree of ongoing economic uncertainty, it’s understandable why many investors may feel uneasy. But by taking a look at what we know about the market, we can draw a positive outlook for UK housing, and already we can see that things are returning to normal.
Let’s look at what the situation was before lockdown. It might seem like a long time ago that Brexit was the trending headline, but if you can cast you mind back you’ll remember that a Conservative general election victory in December 2019 prompted a newfound economic confidence. This filtered into housing and bolstered values across the country. A Nationwide report earlier this year shows that annual house price growth rose to 3.7%, the strongest seen since February 2017.
The key takeaway here is that in spite of the coronavirus issue, political certainty around Brexit remains unchanged, and that if production can return to normal, housing will return to a positive position.
You might ask why we should expect the economy to return to normal in the first place? This is after all an unprecedented crisis. The first thing to remember that unprecedented crises call for unprecedented interventions. The same Nationwide report states that:
“…[T]he raft of policies adopted to support the economy, including to protect businesses and jobs, to support peoples’ incomes and keep borrowing costs down, should set the stage for a rebound once the shock passes, and help limit long-term damage to the economy.
These same measures should also help ensure the impact on the housing market will ultimately be much less than would normally be associated with an economic shock of this magnitude.”
Government schemes of this magnitude, including a £330bn business bailout package, have never been seen before. For investors home and abroad looking at the long term prospects of the UK, it’s surely encouraging to see a government with the capability of implementing such a rescue package.
Protecting jobs means avoiding a recession of the kind seen after the 2008 and early 90s financial crises. This in turn avoids people not being able to pay their mortgages and becoming forced sellers. It also means there would be more potential buyers than in a recession.
When it comes to lending, banks are being encouraged to be generous (while also being careful). Realistically, this means that those in good employment positions will still be able to take out mortgages, avoiding the sort of credit drought seen in 2008.
It s crucial to remember that there are interventions in place to specifically help the housing market, including mortgage payment holidays. There is a proposal to implement 30% discounts for first time buyers and key workers, and even talk of stamp duty holidays.
Here’s perhaps the most important factor: Sentiment. Coronavirus is not going to stop people wanting to move house. In turn, it’s also not going to stop people wanting to move to where jobs are and where local economies thrive – the rules of supply and demand will always apply.
In terms of investor sentiment, the traditional benefits of property investment continue to hold true: Stability in bricks and mortar, (especially compared to stocks and shares), leveraging opportunities, control, and cash-flow will continue to set property apart as a leading form of investment.
What can we say about the current situation then? Although it may seem early to make predictions about the near term, there is already data to suggest demand for housing is picking up – perhaps earlier than many would have expected.
Zoopla recognises an 88% surge in demand since the reopening of the property market last month, and suggest that demand has risen above the level seen before the lockdown began. The latest report shows that Northern English cities including Manchester, Leeds and Liverpool are amongst the top performing cities for demand.
All in all, there are several reasons to feel confident about the UK property market post-lockdown. Of course, more data over the coming weeks will make the picture clearer, but it seems important to remember why property is always an outstanding investment platform – stability. The early signs are strong for a good recovery.
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