How are Investors Reacting to the Property Market?fjpinvestment
It will be, without a doubt, a difficult journey back to economic health for the UK. Much like the rest of the world, the economic impact of COVID-19 has hugely impacted most markets negatively.
With this has led to wider uncertainty in the property market, with forecasts for the future health of the market varying based on the likelihood of a second wave and subsequent lockdown or not.
The Government will be doing everything they can to encourage activity to remain buoyant in the market, though fears of economic stagnation is a concern as 2020 progresses. Without the necessary economic stimulus, the UK’s post-pandemic recovery will not take off.
With limited information surrounding a true containment of the virus, and with uncertainty likely to persist until a vaccine is in circulation, the outlook for the economy is a slow recovery at best.
The Government have been quick to recognise the importance of encouraging activity and have introduced several policies to facilitate this in the property market.
The stamp duty land tax (SDLT) holiday appears to have been a success with an immediate increase of 75 percent in buyer enquiries following the policies implementation. With domestic and international buyers taking advantage of the tax savings, up to £15,000, activity in the market has improved.
This is supported with the latest house price index from Halifax which has highlighted strong growth, a rise of 5.2 percent from the same period last year.
Fears surround whether this growth can be sustained however, with arguments that much of the current activity was ‘pent up’ through the property freeze.
Fears of a second wave
With the current rise in cases we have begun seeing once again, if it becomes apparent that the country does not have a hold over the virus, both overseas and domestic buyers are likely to hold off on any decisions regarding their asset portfolio.
To gauge an idea of the impact of a second wave on the market, we recently commissioned a survey asking over 900 UK-based certified investors how they were managing their financial affairs over this difficult period and how a second wave would impact their investment behaviour.
What became clear is that, although the changes introduced to support the property sector were welcomed, issues in the wider economy could hamper any sustainable growth.
Almost a quarter (24 percent) of investors have or are planning to take advantage of the stamp duty holiday and purchase one or more property.
With that figure rising to 43 percent for those aged between 18 and 34, it is great to see the discounts available as a support for first time buyers or younger entrepreneurs building a real estate portfolio.
With the SDLT holiday period expiring in March 2021, buyers will be keen to finalise purchases early, with an average completion taking three months to go through.
When it comes to the mortgage payment holiday offered by the Government, whilst the holiday was welcomed, many believe it should be extended beyond the current deadline of 31st October 2020 with much of the population continuing to face uncertainty in the way of employment.
Elsewhere, over half (57 percent) of investors feel more should be done in the way of financial relief to help businesses experiencing disruption as a direct result of the pandemic.
The outlook for economic recovery
Perhaps the most worrying result of the survey was the response to the Governments recent health strategy. More than half (54 percent) stated they had lost confidence in Boris Johnsons Government due to the mishandling of the COVID-19 pandemic thus far.
With a rise in case numbers once again, it is looking as though buyers, particularly those overseas are going to shy away from UK assets until it becomes evident the UK have a solid, cohesive strategy going forward.
As it stands, it appears as though we could be facing economic stagnation that is going to spill over into the property market.
The priority now will be for the UK Government to regain some semblance of control, with a clear plan to navigate the upcoming economic hurdles. For economic activity to pick up, investors must be confident that their assets will not face depreciation due to factors outside of their own control.
Thinking optimistically, there is a case for confidence to remain in the market and the current boom we are experiencing in property to sustain throughout the year. Property in the UK has long been resilient to economic disturbance, with the outlook over the long term still favourable for UK property.
Many will continue to take advantage of the discounts being offered during this period of uncertainty. The best-case scenario is the pick-up of activity in the property market has a positive effect on the wider economy, yet only time will tell if this is the case.