2020 has been a rollercoaster of a year presenting investors with opportunities that were totally unexpected.
When considering the current state of the UK property market there are several key factors at play which have had an impact and will continue to affect the conditions in which investors are able to secure buy to let properties.
COVID-19 Pandemic
This time last year we were totally unaware of what was to come and wouldn’t have believed anyone if they’d tried to warn us.
In 2020 the UK property market was effectively closed for business for several weeks as the UK entered total lockdown and only essential business continued to operate physically, where possible companies continued to run virtually.
This only had a limited impact on off market property sales as by nature there does not need to be an in person viewing. Transactions still continued on as usual though in some cases there was a delay caused by companies adjusting to homeworking or where staff were furloughed.
As of December 2020, a Coronavirus vaccine is being rolled out across the country giving the property market a positive boost with the indication that we’re nearing vague normality.
Brexit
At the beginning of 2020, the property market enjoyed the ‘Boris bounce’ as activity increased after the festive break following a decisive Tory win in the general election of December 2019.
Brexit was looming but buyers remained undeterred as Britain formally entered the transition period when the country left the European Union on 31 January 2020.
There have been 11 months to settle a deal though the pandemic put Brexit to the back of the priorities, time runs out at the end of December and there is a possibility that no deal will be agreed.
The consensus in the property industry is that in the wake of the pandemic and the disruption unrelated to Brexit, the UK property market will prove resilient once more with the likes of Rightmove predicting robust average price growth of 4% in 2021.
Stamp Duty Holiday
On 8 July 2020 Chancellor of the Exchequer Rishi Sunak announced a stamp duty holiday that cut the rate of Stamp Duty Land Tax on all purchases that would run until 31 March 2021 triggering a surge in activity across the market.
Buyers who’d been holding off and waiting for Brexit or simply not taking the next step were encouraged to purchase by the stamp duty holiday and transactions increased significantly.
Though the cut applied to all purchases including those made by buy to let investors there was still a charge for those purchasing an additional property or one solely for investment purposes, though at a significantly reduced rate – paying just the 3% surcharge.
There have been calls from several senior industry professionals to extend the stamp duty holiday though the government insist they will not extend the scheme.
Buyer demand was already high following the official reopening of the property market in mid-May though the stamp duty holiday provided a boost in the market.
We firmly believe that panic buying a property just to secure the discounted tax rate makes little sense as it might not be the best investment long term.
Demand for property in 2021
UK Property remains to be an incredibly attractive prospect for investors, a safe haven that continues to prove its resilience.
Demand for investment property in 2021 is expected to be strong with several factors driving purchases.
Hong Kong buyers are expected to be present in the property market in large numbers in the run up to the new Hong Kong British National (Overseas) (BN(O)) visa opens for applications from 31st January 2021.
There is also talk of negative interest rates coming in which could have a positive impact on both the UK mortgage market and housing market. Negative interest rates would also likely result in a weakening of the value of the pound making the UK an even more attractive prospect for overseas buyers.
The trend for relocating to regional cities is one set to continue, with tenants seeking better value for money but not wishing to leave urban life altogether.
Long term view
Investors will often not be looking at the predictions for the immediate 6 months following a purchase, or even within a year, the outlook over the next 5 years is often considered.
Depending on where you buy a property the predictions for price growth from global real estate agent Savills are as high as 27.3%. The front runners in their predictions being the North West region, the North East and West Midlands.
To discuss the UK property market in greater detail and to learn more about the present opportunities available to investors please do contact us. We’re available on +44 (0) 203 950 7939 UK or +971 (0) 4 818 7277 in Dubai or you email us at info@thirlmeredeacon.com
