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End of Lockdown Signals New Start For UK Property

In February, UK Prime Minister Boris Johnson announced the government’s four-stage roadmap out of COVID-19 restrictions. Housing experts are predicting that this also signalled the start of a new era for UK property.

Summary:

  • April 2021 has seen UK life start to get back to ‘normality’, with outdoor dining, non-essential shops, pubs and the beauty industry reopening, and even staycations allowed again.
  • Initial figures from across the housing industry indicate that UK property is reacting strongly to the ease of restrictions, with a ‘post COVID-19’ boom on the horizon.
  • Housing experts and professionals are predicting that the COVID-19 pandemic has changed the way we live, and how we see our homes, forever.

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Confidence in the market

Since COVID-19 became part of the lives of millions of people across the world, the UK government has always made it clear how important the country’s housing market is to the wider economy.

The housing market was re-opened earlier than many others around the globe and the government initiated extra support such as the Stamp Duty Land Tax (SDLT) that was introduced in July 2020 and extended in March 2021.

Looking at the recent data, this support appears to have made a huge difference to the UK housing market, confidence amongst professionals is high with the continued growth:

  • The latest house price index from Halifax shows that property prices increased by 1.1% between February and March 2021 and they are also now 6.5% higher than in March 2020.
  • Recent data from the Office of National Statistics demonstrates that the UK economy returned to growth in February, with output rising by 0.4%. Construction was the highest growth area (rising by 1.6%), providing further support to the UK housing market.
  • The latest economy and property market update from the Royal Institute of Chartered Surveyors (RICS) suggests that property activity is set to increase as lockdown restrictions are lifted. Specifically, their data is showing that tenant demand is remaining firm, with rents projected to rise by around 2.5% nationally over a 12-month time period.
  • Homebuyers and Investors are flocking to property portals, with Rightmove showing record days of activity in March and April. On Wednesday, 7th April more than 9.3 million people visited the property portal.

Read about the UK Housing Market via our Specialist Residential & Buy to Let Division

Employment figures are also thought to be a key indicator of the future strength of property market. Unemployment figures fell in March 2021 and the hope is that as businesses re-open, these figures will fall even further.

Low interest rates are also allowing mortgage borrowing to continue and the fears of an immediate economic shock caused by Brexit appear to be unfounded.

Confidence in the UK in general appears to have been bolstered by the government’s successful roll-out of the vaccination programme and people are optimistic that the country is hopefully on an ‘irreversible path’ out of lockdown. This allows people to more assuredly turn their attentions to matters such as buying houses and making investments.

Overseas investment

Overseas sentiment in the UK market seems to be following the trend of domestic confidence. According to data from estate agent ludlowthompson, the number of as landlords owning property in the UK has reached a five-year high. The number is currently at 184,000 which represents a 19% rise over the past five years.

While there are forthcoming implications from impending tax changes in the buy-to-let sector for overseas buyers, what the COVID-19 pandemic and Brexit show us is that the UK property market is robust enough to attract overseas investment even in the face of adversity.

Future of UK housing market

Many housing experts are forecasting that the market will be changed forever due to the effects of the COVID-19 pandemic. Working-from-home is no longer a perk given by a few choice employers but is being seen as a ‘normal’ way of working that will continue to be a big feature of our lives.

This is having a big effect on how people see their homes and how they need them to function. Many are now desiring bigger living spaces so that they can have a dedicated ‘working-from-home’ area, and the need for outside space in the form of a garden or balcony is also likely to have major implications on the UK residential scene.

While there are many external factors that can be influential on the UK housing market, the reality is that it is a sector that will always bounce-back after a dip. With current house prices growing, demand remaining strong, and the UK government seemingly determined to ensure its strength, the future of the UK housing market is looking bright indeed.

Source: Select Property

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UK mortgage approvals for new house purchases tumble despite growth in remortgaging

The number of mortgages approved for house purchases was almost five per cent lower in August compared with the same time last year, providing fresh evidence of flat activity in London’s property market. Despite the fall in new mortgage approvals, remortgaging soared 9.2 per cent during the month, as a rising number of homeowners looked to lock in more favourable deals ahead of expected higher interest rates.

However, the mortgages approved for people buying houses were down 4.2 per cent year-on-year, underlining a continuation of subdued activity in London’s housing market.

Meanwhile, gross mortgage lending for the total market in August was £24.1bn, falling 1.2 per cent lower than a year earlier, according to today’s UK Finance figures.

Jeremy Leaf, north London estate agent and a former Rics residential chairman, said: “At first glance these figures look quite encouraging but when you appreciate that a substantial part of the increase in lending is to do with remortgaging in anticipation of higher interest rates, the picture is not so rosy.”

Leaf added: “Mortgage approvals for house purchase are lower compared with this time last year, which was not a particularly impressive time anyway. Clearly, the market remains fairly flat without too much movement one way or the other, which is reflected on the high street.

“Confidence is in short supply unless new market conditions are recognised. Having said that, we are seeing more viewings and more realism as the summer period is now behind us. It is now up to sellers to recognise that the market is unlikely to change for the better for some time.”

The news comes despite recent Bank of England data showing that mortgage lending picked up in the second quarter of the year, with new commitments hitting their highest level in more than a decade amid a bump in the number of first-time buyers coming onto the property market.

Peter Tyler, director at UK Finance, said: “Remortgaging continued to dominate in August, as homeowners took advantage of a competitive market to lock into attractive deals. Growth in card spending remained fairly strong, reflecting the boost to retail sales from the warm weather as well as the growing use of credit cards as a preferred means of payment.

“However, the overall economic outlook remains mixed as household incomes continue to be squeezed by rising inflation.”

Source: City A.M.

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UK commercial property outstrips even most bullish expectations

Offices in the UK continued to see strong takeup in the second half of 2017, as the commercial property sector smashed expectations.

But the performance of retail property was less positive, according to UBS Asset Management’s report, which predicted that the high street will continue to suffer from changes to shopping habits.

Overall, the total return from UK commercial real estate in 2017 was 10.3 per cent, outstripping even the most bullish of expectations.

Demand for offices held up, increasing by 19 per cent on 2016. This segment was given a major boost by the presence of the serviced office sector in London, in particular WeWork.

But the retail sector is still facing headwinds including consumer confidence, meaning demand is slowing for traditional shops. The report also suggested that the spate of company voluntary agreements (CVAs) in recent months could shift the power balance away from property investors in the sector.

New Look, Byron, Jamie’s Italian, and Prezzo have all entered into the process to restructure their portfolios, asking some landlords to agree to rent reductions and closing some sites.

But there is a bright spot in industrial space, which UBS says has a growing role in the increased levels of home delivery. Rents on smaller warehouses in South London are thought to have increased a whopping 50 per cent over the last year due to the demand for last mile fulfilment.

Total returns for the logistics property sector reached 21 per cent last year, and returns are expected to be maintained at an average of 7.7 per cent for the next two year period.

Source: City A.M.

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UK property total returns break 10% for 2017

UK commercial property total returns hit 10.2% at the end of November, to already sit ahead of the IPF’s consensus forecast of 8.5% for 2017 as a whole.

CBRE’s latest monthly index found that total returns for November were 1% as the industrial sector out-performed the metrics to give a 0.5% rise in capital values and 0.2% rise in rental values month-on-month overall.

Industrial capital value growth again was the top performer in November, at 1.5% and South East industrials slightly drove this with an increase of 1.6%. Rental value growth in the industrial sector was 0.5%, with the South East again slightly outperforming the rest of UK at 0.6% and 0.2% respectively.

The retail sector also recorded capital value growth, hitting a figure of 0.2% in November while retail warehouses slightly outperformed the other subsectors for the second consecutive month with growth of 0.3% as shopping centre capital values high street shops in the South East both saw no growth.

In the office sector, capital values rose 0.2% despite the City submarket recording a decrease of 0.1% and both the City and West End & Mid Town submarkets reported a decrease in rental values in November at -0.1% and -0.2% respectively.

Miles Gibson, head of research at CBRE UK, said: “UK property has performed steadily and above expectations in 2017 so far, with total returns now in double digits. Industrials continue to lead the way.”

’Robust’ 2018 outlook

CBRE’s accompanying 2018 Market Outlook predicts that the market will continue to perform solidly “despite political unknowns”. They project that property investment volumes will be roughly the same in 2018 as in 2017 although total returns to property are expected to be drop to around 4%.

Gibson added: “While some property sectors will see extremely patchy growth performance [in 2018], the rise and rise of industrials & logistics looks likely to continue, and the ‘beds sectors’ like hotels, built-to-rent and healthcare are also set to grow strongly. Whilst significant risks remain, from reduced consumer spending power, changes to US interest rates and the Brexit denouement, we anticipate robust investment volumes in the property sector in 2018.”

Source: Property Week