COVID-19 & The 2020 UK Property Market

26 Nov 2020

COVID-19 & The 2020 UK Property Market

In a year of turbulence and constant flux, selling, moving home, or finding a mortgage may feel like an impossible task.

However, the property market remains alive and well, with estate agents and lettings managers still operational throughout the current second UK lockdown.

Let's consider what has happened to rentals, investments and house moves this year, and where we might be headed as we edge closer to a new year.

How Have UK House Prices Changed during the Coronavirus Pandemic?

The headline figures are that:

  • In September 2020, 98,010 property sales were completed.
  • This data reflects 21% growth from August and is only 0.7% lower than last year.
  • Nationwide reported house price growth of 5.8% annually in October - the highest growth in five years.

These statistics show that the housing market has grown - even following the sudden contraction in April through to June when the initial lockdown was initiated.

For homebuyers and movers, growth could be seen as a negative; in that new purchases or property investments may be 5.8% more expensive now than they were a year ago.

However, when you factor into that low-interest rates, the stamp duty holiday and appreciation of values on existing properties, investing becomes a more attractive proposition.

What Has Driven 2020 Property Market Growth?

The pandemic itself has dealt a terrible blow to multiple industries and sectors, with the full impacts yet to be quantified.

Effects, though, haven't all been as noticeable as business closures.

  • City dwellers are seeking more properties in towns and rural locations, having experienced the claustrophobia of a full lockdown in densely urban cities.
  • Properties in commuter belts have shot up in prices, as distance working and remote offices become the norm for office workers across the UK.
  • Families are focusing more on quality of life than the prestigious value of a postcode, with quieter regions experiencing floods of new property buyers moving to peaceful towns and villages.

While house prices dropped around 3.2% between April and June, the announcement in July of a temporary increase to the stamp duty threshold has, as intended, reignited momentum in a stalling market.

Have Stamp Duty Holidays Made a Significant Impact?

It would seem they have! Until March 2021, property investors can waive stamp duty tax up to the value of £500,000 - what this means is that a new portfolio property or residence will cost as much as £15,000 less than it would have in June - and will do again come next April.

Landlords and investors are still subject to second home taxes, but these remain in place regardless, and the saving on offer is substantial.

Rental markets have rebounded as quickly as property sales. So the investment climate is rich, with the potential to purchase a new buy to let home at a significant saving, even when considering cumulative growth in property values.

The difficulty, of course, is in knowing what the future brings.

  • Prices are tipped to shrink down again once the stamp duty holiday ends, and tax savings revert.
  • Current moves include backlogs of transactions delayed by the pandemic lockdowns, and will eventually catch up and return to average trading volumes.
  • Economic recession is a likely outcome and may change the outlook when it comes to new business ventures.

Currently, estimates are widely varied. Some forecasters predict stability, and yet no further growth in 2021 - Savills and Hamptons International anticipate that prices will rise an additional 2% in this quarter, with a slight downturn in Q1 of 2021.

Deutsche Bank has reported forecasts showing drops in property values up to 23% next year.

However, estimates and forecasts are never certain. It seems most likely that prices will drop slightly in early 2021, but return to pre-pandemic values in a relatively short period.

The housing market has proven to be adept at flexing quickly to changes in demand. With droves of movers looking for rental and purchase properties in new locations, it is expected that rural towns within commuting distance will remain the most lucrative market propositions.

Can I Get a Mortgage on a Property During Lockdown?

Property prices and appetites for investment have a direct impact on the mortgage sector.

This year has seen rapid changes to lending options like never before, with impacts to interest rates, new products on the market, and changing lender attitudes both to become more rigid and more flexible depending on the applicant.

The good news is that, yes, you can still apply for mortgage lending during lockdown!

With so much uncertainty, investors and residential buyers alike are scrambling to complete before March 2021. It may seem a while away yet, but as we all know, four months is a short period when it comes to purchasing a new home.

In this second lockdown, Robert Jenrick has confirmed that viewings, moves and valuations can still go ahead - with appropriate safety systems in place - and so the market remains open for business and operating at maximum capacity.

While earlier this year, as interest rates dived from 0.25% to 0.1%, lenders were faced with a sudden crisis to amplify the impact that would be felt only a few days later when the full lockdown was announced.

At this stage:

  • Around 50% or mortgage products were pulled.
  • Banks ceased accepting applications from any new customers.
  • Property valuations were halted indefinitely.
  • High LTV lending such as Help to Buy was incredibly hard to find.

A by-product of the fast market bounce back is that we are now seeing lending levels returning to normal, and indeed exceeding forecasts.

New processes such as automated valuations on homes under £700,00, digital viewings and online consultations have also helped lenders get back into a good position to consider new mortgage applicants.

Even high LTV products such as 95% H2B mortgages are back in action, with lenders from the high street through to specialist lenders opening their books.

The key now is to keep a watchful eye on property prices and ensure you commission an experienced broker to steer you through your application. It is crucial to move quickly during this period of relative stability - before the market faces a new challenge in navigating a post-Brexit market come January.

For more help and assistance securing your mortgage lending, contact Revolution Brokers for bespoke advice from the UK mortgage experts.

Contact us now to discuss your personal options, Revolution Finance Brokers specialise in commercial and residential finance in Essex, Kent, London and Hertfordshire.

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Almas Uddin

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