If we thought Brexit’s economic downturns would severely affect the London property market, we likely did not see Covid-19 coming. The UK is thought to be facing a severe recession. Yet, the growth rate of London property prices is predicted to gently rise in the next year, so what does this mean for UK property and the London property market?
After being frozen since March 2020, the reopening of the housing market led to a buoyant recovery few had expected. This was fuelled by a flurry of pent-up demand from buyers poised to take advantage of Rishi Sunak’s stamp duty holiday and low-interest base rates (at an all-time low of 0.1%). Indeed, the property market is experiencing an all-time high of average UK house prices, reaching a record £245,000.
Covid-19 Pandemic Impact on London House Prices
London property prices flatlined and even declined by 2% for the first time in years during the lockdown months of 2020. The lockdown impacted professionals in the property market few would normally think of: surveyors, in particular, could no longer carry out valuations, putting the entire buying and selling process on hold. Even estate agents had to turn to remote viewing technology to secure property viewings and sales.
When lockdown measures were lifted in the summer, plateauing London prices were unflatteringly compared with the rising prices of houses elsewhere. Workers realised they could work from home and families sought to leave urban environments when buying a home. This rumoured ‘urban exodus’ drove up the average prices of homes across the UK, while wilting London property prices stayed relatively stable.
Similarly, despite the stamp duty cut that was introduced to tempt investors, a lack of demand for London’s most exclusive areas from overseas buyers has kept the prices lower than usual. But experts have reason to believe that within a few months, London’s property market will slide back into its long-term growth cycle, with predicted growth percentages of 1.5% in 2022 and 3% in 2023.
Additionally, since the property market thrives off of widespread optimism as much as it wilts under uncertainty, the advent of the coronavirus vaccine could well bolster it against the faltering demand predicted for 2021-2022.
Should I Buy London Property in 2020?
Predictably, there is no easy answer to this question, but the property market is showing significant signs of stabilising and is definitely moving again. However, if you are thinking of investing in a London property, exercising even more caution than usual is definitely a good idea.
Overall, there are two silver linings for the London property market in these unpredictable times:
Firstly, even if the price falls, buying a London property in 2020 may still be a wise investment. Property is after all a long-term investment, and not many others are both secure and pay a good return between 3-5%. First-time buyers and less experienced investors should probably hold off from immediate decisions until there is a bit more certainty in the market. However, if you have a ready deposit and a secure job, there’s no reason not to start looking.
Secondly, while retail is being hit by what looks like a coup de grâce from the double-edged sword that is 2020 economics, the so-called brick and mortar retail sector is far from as inflexible as we could believe.
The purposes of existing buildings always change over time, with many old retail buildings being repurposed into hotels, restaurants and housing estates. Services, in other words, which you cannot obtain online. While the pandemic is a nasty shock to the London property market, there is lots of evidence to suggest it may only speed up changes that were already taking place.