If you’re wondering what’s going to happen to the UK property market after lockdown you’re not alone.
The media is happily pedalling any prediction or forecast that’s put out, predictably making the most noise about any prediction that includes a negative spin but what’s really going on? Will the property market crash? What’s the outlook for rental demand and would the end of lockdown lead to a rise in demand for investment property?
Will the property market crash in 2021?
It was a surprise to many that the UK experienced a property boom, dubbed the ‘Boris bounce’, in the first few months of 2020 when everyone was fretting over Brexit. No one expected the property market to outshine other markets so impressively when the coronavirus began to spread across the world. And it was unimaginable during the first lockdown in March last year that overall in 2020 the UK property market would see the highest annual growth rate since October 2014.
The combination of the government’s policies to support incomes and the stamp duty land tax temporary holiday have had a significant impact. Furthermore, everyone being forced to stay at home resulted in many deciding it was in fact time to move house.
There’s no hiding from the fact that as the vaccine rolls out across the country and we return to some vague normality, moving house might fall down the priority list, especially since the stamp duty holiday is set to come to an end.
So what does all this mean for the UK property market?
The stamp duty holiday presented a saving but it’s important to remember that the UK property market boomed from the moment it reopened in mid-May of 2020, the stamp duty holiday was announced in early July and for many was a welcome saving but not the driving force behind a move.
The dramatic headlines of a crash are attention grabbing but have little evidence to substantiate their claims. There might well be a lull, a period where property price growth stalls, before resuming at a steady rate.
The long term projections for the UK property market remain positive and this is what a discerning buy-to-let property investor will be focusing on.
Why are people investing in property?
Successful investors are known to pick their moments, striking when there is a window of opportunity to secure buy-to-let property at the most opportune time.
As we emerge from the pandemic there is likely to be continued and even a rise in interest for property for investment. The UK is seen as a safe haven for property investors across the world.
There are a number of key reasons why people are choosing to invest in property in 2021:
Property price predictions
The UK has enjoyed continued price growth for many years and though its expected to slow temporarily the five year forecasts for property prices across the UK are impressive. With certain regions outperforming others, where you buy will dictate the level of your success.
The North West region of England is predicted to see price growth of 27.3% by 2024, comparatively London is predicted to experience 12.7% growth over the same period.
Demand for rental property
Rental demand is expected to remain strong and in fact, rise through 2021. Uncertainty and certain challenges in obtaining a mortgage, such as saving for the deposit, will force many to remain in rented accommodation for many years to come and for an increasing number indefinitely.
Not always a negative, there is a desire and increasing preference to live in rented accommodation, the term ‘generation rent’ is often used. There’s also a preference to avoid the ongoing costs of owning a property, and many aren’t keen on the notion of being tied to one place for an extended period. Renting is more fluid.
This more European way of thinking means many have no ambition to ever own property, only 43% of Germans own the property they live in. It’s far more common for tenants to negotiate long-term rental contracts over several years.
Furthermore, over recent years many hobby landlords have chosen to leave the buy-to-let sector adding to the shortage of rental properties available to tenants.
Forecasts predict that rental prices will continue to gradually increase, with regional areas expected to perform well. JLL predicts that Manchester will experience 16.5% rental growth over the next 5 years and Birmingham 15.9% over the same period.
Low interest rates
Interest rates in the UK are currently very low. The Bank of England Base Rate is at a historic low of 0.1% meaning that many lenders are offering competitive Buy-to-let rates. This is perfect for those who are obtaining their first buy-to-let mortgage and it’s also great for those who are remortgaging existing properties to release equity and leverage new investment properties.
Many key cities outside of London have undergone significant transformations over the past 10 years. Birmingham is one such example where there have been several huge regeneration projects including the £500million redevelopment of New Street Station, there are further plans in the pipeline too.
Continued improvement encourages strong price growth, there are many cities and towns across the UK that are currently prime investment targets based on the projects that are underway and those in the planning stages.
Investment in infrastructure
The UK is serious about improving infrastructure and there are several key projects underway and almost completed. Crossrail will have a dramatic effect on travel times in the South East and the HS2 route is set to do the same for the Midlands with the connection between Birmingham and London improved significantly. There are many parts of the UK that are set to enjoy improvements and investment into infrastructure.
Buying investment property in 2021
Lockdown is unlikely to have a huge effect on demand for property for investment as for the most part investors have remained active throughout the pandemic recognising the present opportunity.
For a number of reasons, as highlighted above, 2021 is a good time to invest, it is absolutely still worth investing in buy-to-let.