The UK Property recovery has begun

By Jamie Johnson is the CEO of FJP Investment,

The UK property sector will be integral to the country’s economic recovery from the direct and indirect effects of COVID-19. The Government certainly believes as much, with Chancellor Rishi Sunak implementing a series of sweeping changes to support property transactions amidst the pandemic. Most recently, on  July 6^th, 2020, it was announced that the first £500,000 of all property sales are now entirely exempt from Stamp Duty Land Tax (SDLT); including buy-to-let properties and second homes.

This attempt at boosting stimulus in the market is understandable. The real estate market is a key driver of national productivity and a big attractor of foreign investment to the UK. Thankfully for the Government, this policy has already been shown to be going some way in unlocking the stagnant demand for property that has been held back by COVID-19 uncertainty.

The boost the market needed

Mere weeks after this tax break was introduced, property journalists were already reporting a mini-property market boom. The property listing site Rightmove recorded an incredible 75% year-on-year increase for the month of July and a 2.4% rise in the asking prices of new properties on the website when compared to March levels pre-lockdown.

Whilst it is still too early to gauge how actual transaction numbers have been affected, this is a huge indicator that the Government’s policy has, thus far, been a success. After months of property price decline and housing market inactivity due to contagion fears surrounding COVID-19, the slump has finally ended, and buyers now feel confident enough to close on purchases once again.

But this demand will not be spread across the UK entirely evenly, so it’s worth examining how the continued presence of COVID-19 in our lives is shifting priorities in the minds of prospective buyers.

Stable demand, popularity shifting

With the working from home revolution seeming like it’s here to stay, it’s understandable that many of the working professionals who have found themselves having to turn their living spaces into work spaces may seek larger properties further from their employer’s traditional office space.

Jamie Johnson

The aforementioned Rightmove figures support this claim. The rise in interest of London properties was just 0.5%, far behind the national average. This would make a change from the traditionally London-focused drive of the nation’s housing market; especially if we consider that this change in buyer sentiment may spur investors to look to places other  than the capital when deciding where to invest in new high-end developments in the future.

Sunny skies ahead

This imbuing of market activity is likely to push up house prices for the foreseeable future. This would certainty follow expert’s forecasts, as global estate agent Savills recently stood by their prediction of 15% general house price growth in the UK by 2024. They cited the inevitable return of the buyer demand we witnessed in January 2020 once the novel coronavirus was in retreat; and it largely seems like, in conjunction with the Government SDLT holiday, this is exactly what’s happening.

FJP Investment commissioned research earlier this year which supports this projection. We found that 43% of property investors weren’t planning on making any financial decisions until COVID-19 had been effectively contained. With the virus now in retreat, it seems like confidence has risen. As a result, both investors and buyers are returning to the market in droves. Nationwide’s House Price Index for July, for example, showed that house prices have increased by 1.7% month-on-month.

Of course, I must taper this optimism with the knowledge that a second spike in cases or virus mutation could well set this recovery off-course. In short, there are still plenty of unknowns to content with.

However, as it currently stands, it seems as through the Government’s SDLT tax break will successfully encourage buyers (and sellers) to push up housing market activity for the foreseeable future. I look forward to being to a part of the UK property renewal in the coming months, and for the housing sector to provide the impetus for a strong UK economic recovery more generally.