For the vast majority of us, 2020 has been a year to forget and one which we could never have predicted. We have witnessed first-hand the huge impact that COVID-19 has had on all of our lives, and we recognise the role that it will inevitably continue to play well into the future.
The lockdown measures implemented by the UK Government ground everything to a halt and this had a dramatic impact in relation to the residential property market.
Surveyors were not able to inspect property which hampered lending and home purchases, Estate Agents were no longer able to show buyers or potential tenants around homes, and the market came to a complete standstill. Fast forward a few months and lockdown measures were eased – much to the delight of everyone, from lenders and investors / homeowners, to the professional advisory community.
The residential property market “bounced back” to a certain degree of normality. The Stamp Duty Holiday was introduced until 1 April 2021 and everything seemed to be back to normal.
Or was it just a false dawn?
Now the furlough scheme has ended, leaving thousands unemployed and the risk of further redundancies looming across many sectors, potential buyers are taking a cautious view, waiting to see how the rest of 2020 and early 2021 play out.
Banks and building societies are also tightening their lending criteria as a result of the pandemic, taking a more cautious view due to rising unemployment and the possibility of repayment arrears.
The impact Lockdown had on people’s lives and the new normal that now is remote working, has led many to reassess their living requirements, needs and wants.
Many of those living in Central London flats, some of whom alone, are now questioning whether it is worth it. Is it worth owning a flat in a prime area, if it is so small that you are now confined like a prisoner, with just a few square metres to plod?
As a result, many are now exploring the opportunity of a larger property in leafy areas outside the prime or central areas, with outside space.
From a practical perspective, now that people may be working from home on a much more regular basis, many simply won’t need to be in Central London anymore and would be able to commute if needs be, which is creating mini booms in rural areas.
This trend looks set to continue, with many of the world’s largest companies not reopening their central London offices until summer 2021.
The rental market has also been hit hard, with an oversupply of properties and agents seeing between a 10% and 20% drop in rental asking prices. This is particularly true for homes in central London and should be a note of caution to sellers who might ordinarily wish to just rent their property if they were unable or unwilling to sell.
For those that can afford it, a pied-à-terre in London is an attractive proposal, providing the flexibility of a city “bolt hole” a few days a week, with the opportunity to retreat to a rural setting for the remainder.
If you are considering investing in a small second home, the Stamp Duty Holiday might inform your decision, with the possibility of letting it at weekends or on a short term basis.
Travel restrictions in light of COVID 19 and ongoing Brexit negotiations have hampered interest in the London residential property market somewhat.
From 1 April 2021, there will be a 2% Stamp Duty surcharge for overseas investors, which together with a weakening sterling and Stamp Duty Holiday, may make residential property more appealing, provided it is priced attractively and sensibly, especially for property in prime locations.
The Stamp Duty Surcharge will operate in addition to the current 3% ‘additional homes’ surcharge, the 15% for certain corporate purchases and the rates of lease duty, where a non-UK buyer purchases residential property in England and Northern Ireland.
As we enter winter, with new lockdown measures introduced nationwide and the looming Brexit deadline, there are contrasting reports from agents in London.
Some state that the market has never been busier, with demand as high today as when lockdown was eased. Meanwhile others have a different view, claiming that there is simply too much stock on the market and that buyers are now adopting a cautious approach which, regardless of current low interest rates, is resulting in a correction of prices due to the imbalance of demand versus supply.
With this oversupply, there are also reports of properties being inflated in terms of asking price, which are now being down valued. However, this does not suggest that prices are falling, rather that overinflated asking prices simply cannot be achieved.
We are all are hoping for a better year in 2021, where we can go back to some sort of normality, put Brexit behind us once and for all, and hopefully see a vaccine for COVID-19 rolled out.
Perhaps by then we will also see some more stability and confidence return to the residential property market.
In the meantime, if you would like your residential property to be valued, or you are interested in investing in residential property in London, contact residential property valuation expert, David Dunwoody.