What impact has Covid-19 had on the UK Property Market?
Investing in the UK property market remains an opportunity for long-term investors.
For investors who are building long-term investment portfolios, it is worth noting that overall, in times of past uncertainty, the UK property market has remained robust – even continuing to grow and thrive. In particular, the London property market has proven to be consistently resilient.
UK PROPERTY AND PAST CRISES
While the UK has faced some uncertainty in recent years, property prices following the implementation of Brexit in January 2020 looked promising. The question many potential investors are asking now is how the coronavirus pandemic is influencing the UK property market?
It is impossible to know exactly how property markets will react to local or global conditions, however, looking at past circumstances is a good way to predict how the UK’s property market could react to this global pandemic.
The 2008 financial crisis. No country escaped the economic impact of the 2008 financial crisis. However, because property is a long-term investment, investors can benefit from markets not only bouncing back, but continuing to grow after a crisis passes.
For example, London has experienced an 83% growth in housing prices over the past decade, and an increase of 308% since 2000. So, while the financial crisis slowed growth for several years, the market not only bounced back, but exceeded previous market highs.
The impact of the H1N1 pandemic. Otherwise known as swine flu, H1N1 arrived in the UK in April 2009. The outbreak had a humanitarian cost as well as an economic cost, reducing construction activity and resulting in fewer approved mortgages. Nevertheless, housing prices increased by 10.1% between March 2009 and March 2010, and even reached 15.6% in London.
The impact of Brexit. While expectations were that property values would drop following the Brexit vote in 2016, the opposite proved true, with UK property prices growing in 2016 and then again in October 2017, just over one year later.
The election of Boris Johnson. Following the various post-Brexit vote upheavals in the UK’s cabinet, the election of Boris Johnson as Prime Minister in December 2019 was expected to result in a dip in property prices. Instead, the UK experienced the ‘Boris Bounce’, which was an increase of more than 2% in property prices by January 2020 due to a boost in market certainty.
HOW HAS THE MARKET RESPONDED TO COVID-19?
The stock market has been impacted by the Covid-19 outbreak, however, there have been no noticeable changes to the performance of the UK’s property market.
For example, in February 2020, a residential market survey from the Royal Institution of Chartered Surveyors found that property prices had risen at their fastest pace since July 2018.
Similarly, a survey conducted by Benham and Reeves revealed that 83% of participants were still planning to continue with property sales and purchases, despite the Covid-19 pandemic.
There is a lot of uncertainty surrounding Covid-19, and markets are likely to get worse before they improve again.
It’s worth keeping in mind, however, that property is a tangible asset. Bricks and mortar have proven to remain a resilient investment, even during uncertain times. Because property is a long-term investment, investors can also purchase property during a crisis and wait for markets to improve once things stabilise. Find out more about UK Property Lending.
Standard Bank can assist clients wishing to invest into purchase to let residential UK Property Lending. Contact your private bankeror financial advisor to determine whether this is an investment space that suits your investment portfolio and long-term investment goals.